Standard & Poor's (S&P) Ratings Services has upgraded
its outlook on
Ford Motor Co.
) to "Positive" from "Stable." The revision is based on the
company's performance in North America which generated higher cash
flow and profits. The agency also believes that the company's
initiative in restructuring the European operations will be
profitable even in a weak sales scenario in the region.
Ford's North American operation has recorded a 1% growth in
revenues to $19.7 billion in the second quarter of 2012. Pre-tax
operating profit improved 5% to $2 billion from $1.9 billion a year
ago due to higher net pricing, improved contribution costs and
other factors, partly offset by higher structural costs and
unfavorable volume and mix.
However, the company posted a 39% fall in profits to $1.20 billion
or 30 cents per share in the quarter from $1.98 billion or 49 cents
per share in the corresponding quarter of 2011 due to lower
operating results in all the regions except North America. However,
the earnings per share were higher than the Zacks Consensus
Estimate of 28 cents.
S&P rating service, however, retained its credit rating to
"BB+." The credit rating can be upgraded to "investment grade" if
the company further improves its profitability across the regions.
Meanwhile, Moody's and Fitch Ratings have raised the company's
credit rating from junk status to investment grade. Ratings
upgrades will help the company in lowering its borrowing costs and
increase the number of buyers for its bonds.
In addition, Ford reclaimed custody of its renowned blue oval
logo following the upgrades. The logo was used, along with
factories and other assets, as collateral to acquire a loan of
$23.5 billion in 2006. With this, the company survived the
bankruptcy along with the great recession and financial crisis.
FORD MOTOR CO (F): Free Stock Analysis Report
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Michigan-based Ford Motor Co. is one of the largest automobile
producers globally. The company is divided into two segments:
Automotive and Financial services. Its core and affiliated
automotive brands include Ford, Lincoln and Mercury. Although the
U.S. is Ford's primary selling ground, Europe, South America and
Asia-Pacific constitute its other major markets.
Currently, Ford retains a Zacks #4 Rank, which translates into a
short-term (1 to 3 months) Sell rating. We have a long-term
Underperform recommendation on the stock.