Stock Alert for Ford Motor Co. (NYSE: F)
Ford Motor Company designs, develops, manufactures, and services cars and trucks worldwide. Ford and its subsidiaries also engage in other businesses, including financing vehicles. It operates in two sectors, Automotive and Financial Services. The Automotive sector sells vehicles under Ford, Mercury, Lincoln, and Volvo brand names. This sector markets cars, trucks, and parts through retail dealers in North America, and through distributors and dealers outside of North America. It also sells cars and trucks to dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. In addition, this sector provides retail customers with a range of after-the-sale vehicle services and products in areas, such as maintenance and light repair, heavy repair, collision, vehicle accessories, and extended service warranty under the Genuine Ford, Lincoln-Mercury Parts and Service, Ford Custom Accessories, Ford Extended Service Plan, and Motorcraft brand names. The Financial Services sector offers various automotive financing products to and through automotive dealers. It offers retail financing, which includes purchasing retail installment sale contracts and retail lease contracts from dealers, and financing to commercial customers to purchase or lease vehicle fleets; wholesale financing that comprises making loans to dealers to finance the purchase of vehicle inventory; and other financing, which consists of making loans to dealers for working capital, improvements to dealership facilities, and to purchase or finance dealership real estate. This sector also services the finance receivables and leases that it originates and purchases, makes loans to its affiliates, purchases receivables, and provides insurance services related to its financing programs.
Ford Motor Company was founded in 1903 and is based in Dearborn, Michigan.
| Share Statistics (Aug-11-10) | FY
2007 |
FY
2008 |
%
Chg |
Q4 2008 | Q4 2009 | %
Chg |
||
| Symbol | F | Revenue, $Mn | 172.5B | 139.3B | 19.2% | 38.60B | 27.19B | 29.6% |
| Current price | $12.41 | Gross marg. | 10.8% | 6.4% | 40.7% | n/a | n/a | n/a |
| 52wk Range: | $14.57-6.61 | Oper. margin | -4.7% | -10.9% | 131.9% | n/a | n/a | n/a |
| Avg Vol (3m): | 94,989,100 | Net margin | -1.6% | -10.6% | 84.9% | n/a | n/a | n/a |
| Market Cap. | 44.18B | |||||||
| Shares Outst. | 3.3B | EPS, $ | -1.40 | -6.41 | 357.9% | -2.46 | 0.25 | 110.2% |
Source: Reuters.com, SEC Filings.
Financial Summary
Ford recently reported second quarter 2010 net income of $2.6 billion, or 61 cents per share, a $338 million improvement from second quarter 2009, as each of its major business operations around the world recorded improved profits.
Excluding special items, Ford reported a pre-tax operating profit of $2.9 billion, or 68 cents per share, an improvement of $3.5 billion from a year ago and a $932 million improvement from the prior quarter, and the company’s best quarterly performance since the first quarter of 2004. Ford has posted an Automotive and total company pre-tax operating profit for four consecutive quarters.
Ford North America posted a second quarter pre-tax operating profit of $1.9 billion, a $2.8 billion improvement from second quarter 2009.
Ford’s second quarter revenue was $31.3 billion, up $4.5 billion from the same period a year ago. Excluding Volvo revenue from 2009, Ford’s revenue in the second quarter was up $7.4 billion compared to 2009, or over 30%.
Automotive operating-related cash flow was positive $2.6 billion during the second quarter, primarily reflecting pre-tax operating profits and favorable changes in working capital.
Ford finished the second quarter with $21.9 billion in Automotive gross cash, a decrease of $3.4 billion since the first quarter, as a result of substantial debt reduction actions. Including available credit lines, total Automotive liquidity was $25.4 billion at the end of the quarter.
The Company ended the second quarter with Automotive debt of $27.3 billion, down $7 billion in the quarter. The reduction included a $3.8 billion payment by Ford to the UAW Retiree Medical Benefits Trust, and a $3 billion repayment of Ford’s revolving credit facility. The debt reduction will save Ford more than $470 million in annualized interest savings.
Special items were an unfavorable pre-tax amount of $95 million in the second quarter. Ford recorded $229 million of personnel and dealer-related charges related primarily to the plan to discontinue production of the Mercury brand, which was offset partially by $94 million of favorable held-for-sale adjustments for Volvo and a $40 million gain related to the full pre-payment of Ford’s VEBA Note A debt obligation at a discount.
The first half cost associated with Mercury discontinuation and total U.S. dealer reductions is expected to be somewhat less than half of the total expected special item charges for these actions during the 2010 to 2011 period.
If Volvo had continued to be reported as an ongoing operation, Ford would have reported a second quarter pre-tax operating profit of $53 million for Volvo, representing a $290 million improvement compared to the second quarter of 2009.
For the second quarter of 2010, Ford’s worldwide Automotive sector reported a pre-tax operating profit of $2.1 billion, compared with a loss of $1.1 billion a year ago. The improvement primarily reflected favorable volume and mix, net pricing and exchange.
Total vehicle wholesales in the second quarter were 1.4 million, compared with 1.2 million units a year ago. Worldwide Automotive revenue in the second quarter was $28.8 billion, up from $23.6 billion a year ago. Wholesales, revenues and operating results for 2010 exclude Volvo, while 2009 results include Volvo.
North America: For the second quarter, Ford North America reported a pre-tax operating profit of $1.9 billion, compared with a loss of $899 million a year ago and a profit of $1.2 billion in the first quarter of 2010. The year-over-year improvement was explained primarily by favorable volume and mix, net pricing and exchange. Second quarter revenue was $16.9 billion, up from $10.7 billion a year ago.
South America: For the second quarter, Ford South America reported a pre-tax operating profit of $285 million, compared with a profit of $86 million a year ago and a profit of $203 million in the first quarter. The year-over-year increase reflects primarily favorable net pricing, favorable exchange, and higher volume, offset partially by higher commodity and structural costs. Second quarter revenue was $2.6 billion, up from $1.8 billion a year ago.
Europe: For the second quarter, Ford Europe reported a pre-tax operating profit of $322 million, compared with a profit of $57 million a year ago and a profit of $107 million in the first quarter. The year-over-year increase was explained primarily by lower costs, driven in part by lower spending related to distressed suppliers and a warranty reserve adjustment not expected to reoccur, offset partially by unfavorable net pricing. Second quarter revenue was $7.5 billion, up from $7 billion a year ago.
Asia Pacific Africa: For the second quarter, Ford Asia Pacific Africa reported a pre-tax operating profit of $113 million, compared with a loss of $27 million a year ago and a pre-tax operating profit of $23 million in the first quarter. The year-over-year improvement is more than explained by higher volume, reflecting primarily higher industry, lower costs, and favorable exchange. Second quarter revenue was $1.8 billion, up from $1.2 billion a year ago.
Other Automotive: Other Automotive consists primarily of interest and financing-related costs and resulted in a second quarter pre-tax loss of $551 million, explained by net interest expense of $459 million and $92 million of unfavorable fair market value adjustments, associated primarily with F’s investment in Mazda.
For the second quarter, Ford Credit reported a pre-tax operating profit of $888 million compared with a profit of $646 million a year ago and a profit of $828 million in the first quarter. The year-over-year increase reflected primarily a lower provision for credit losses and lower residual losses due to higher auction values, offset partially by the non-recurrence of prior year net gains related to unhedged currency exposures and lower volume.
OUTLOOK
Ford said it continues to make progress on all four pillars of its plan:
- Aggressively restructuring to operate profitably at the current demand and changing model mix
- Accelerating the development of new products that customers want and value
- Financing the plan and improving the balance sheet
- Working together effectively as one team, leveraging Ford’s global assets
Ford expects third quarter 2010 production to be up 126,000 units compared with year-ago levels, reflecting continued strong demand for Ford products, maintenance of competitive stock levels, and the non-recurrence of prior-year stock reductions. Third quarter production will be down 174,000 units compared to second quarter 2010 production, reflecting planned vacation shutdowns during the third quarter that generally are used to prepare for new models.
Fourth quarter production also will be affected by planned holiday shutdowns and new product changeovers for vehicles such as Focus and Explorer. Overall, Ford’s third and fourth quarter production schedule is lower than the first half but consistent with the company’s strategy to match supply with demand.
Ford expects full-year 2010 U.S. industry volume will be in the range of 11.5 million to 12 million units. In the 19 markets Ford tracks in Europe, full-year industry volume is expected to be in the 14.5 million to 15 million unit range, reflecting a stronger-than-expected first half offset by a weaker second half.
Ford now expects full-year 2010 U.S. total market share and its share of the U.S. retail market to be improved compared with 2009. Europe market share for the full year is now expected to be about equal to the first half of 2010, but lower than 2009, reflecting the Company’s decision to limit increases in incentives in the region.
Ford is on track to improve full-year quality for all regions, compared with a year ago.
Ford has achieved significant structural cost reductions over the past four years. In 2010, Ford expects full-year Automotive structural costs to be about $1 billion higher to support growth and key product introductions. Ford’s cost structure, however, continues to improve as a percentage of revenue. Ford also expects full-year commodity costs to increase by about $1 billion.
Capital expenditures were $1.9 billion in the first half. Ford expects full-year capital spending to be about $4.5 billion to support its product plan, as the company continues to realize efficiencies from its global product development processes.
Ford Credit now expects full-year 2010 profits to be higher than its 2009 profits. The second half of 2010, will be lower than the first half because Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half.
Ford expects to have solid financial results in the second half, continuing to exceed the expectations it had earlier this year.
As in most years, Ford’s first half results will be stronger than second half, reflecting normal seasonality – including lower second half volumes related to planned shutdowns and product launches. This year, F also expects higher investment and costs in the second half to support growth and key product introductions, as well as higher commodity costs and smaller reductions in reserves at Ford Credit.
Overall, Ford is on track to deliver solid profits and positive Automotive operating-related cash flow for 2010, providing a solid foundation for continuing growth.
| Financial Strength (Aug-9-2010) | Company | Industry | Sector | S&P 500 |
| Quick Ratio (MRQ) | – | 0.31 | 0.63 | 0.75 |
| Current Ratio (MRQ) | – | 0.36 | 0.79 | 0.89 |
| Long-Term Debt to Equity(MRQ) | – | 17.49 | 22.30 | 116.56 |
| Total Debt to Equity (MRQ) | – | 31.66 | 38.68 | 174.58 |
Source: Reuters.com, SEC Filings.
Analyst Consensus
This is the consensus forecast amongst 18 polled investment analysts. Against the Ford Motor Co company.
| Latest | 6 | 2 | 8 | 2 | 0 | 0 |
| 4 weeks ago | 6 | 2 | 6 | 2 | 1 | 0 |
| 2 months ago | 6 | 2 | 5 | 2 | 2 | 0 |
| 3 months ago | 6 | 2 | 4 | 2 | 2 | 0 |
| Last year | 3 | 3 | 4 | 2 | 2 | 0 |
The 13 analysts offering 12 month price targets for F have a median target of 16.00, with a high estimate of 20.00 and a low estimate of 11.00. The median estimate represents a 22.70% increase from the last price of 13.04.
Source: www.ft.com
Consensus Estimates Analysis
| # of Estimates | Mean | High | Low | 1 Year Ago | |
| SALES (in millions) | |||||
| Quarter Ending Sep-10 | 7 | 27,980.80 | 32,382.80 | 24,950.00 | 27,002.50 |
| Quarter Ending Dec-10 | 7 | 29,664.80 | 36,221.90 | 26,372.00 | 30,187.50 |
| Year Ending Dec-10 | 9 | 116,373.00 | 130,410.00 | 107,274.00 | 111,086.00 |
| Year Ending Dec-11 | 7 | 124,377.00 | 136,832.00 | 117,816.00 | 121,642.00 |
| EARNINGS (per share) | |||||
| Quarter Ending Sep-10 | 14 | 0.35 | 0.48 | 0.26 | -0.10 |
| Quarter Ending Dec-10 | 10 | 0.38 | 0.49 | 0.25 | 0.15 |
| Year Ending Dec-10 | 17 | 1.74 | 2.08 | 0.94 | 0.09 |
| Year Ending Dec-11 | 16 | 1.88 | 2.26 | 1.28 | 0.94 |
| LT Growth Rate (%) | 4 | 13.88 | 24.30 | 5.00 | 4.00 |
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=F
Investment Highlights
Ford is planning to win back its investment grade credit rating that it lost in 2005, the Wall Street Journal said, citing people familiar with the situation. Ford the only U.S. car maker that did not receive a government bailout during the financial crisis, aims to get back the investment grade rating in 2012, or by the end of 2011.
An investment grade rating usually means a company can borrow money at lower interest rates. In the second quarter, Ford retired $7 billion of debt, lowering annualized interest costs by more than $470 million. Ford ended the quarter with $27.3 billion in automotive debt. Ford expects to be solidly profitable this year, but it borrowed more than $23 billion in late 2006 to fund its turnaround, leaving it with a far heavier debt load than the post-bankruptcy GM and Chrysler.
Ford avoided the bankruptcies that engulfed GM (GM.UL) and Chrysler but supported its rivals in their requests for U.S. government funding that also helped to prevent a collapse of the auto parts supply base.
2011 Outlook
For 2011, based on present planning assumptions, Ford expects continued improvement in total company profitability and Automotive operating-related cash flow, including improvements in its Automotive operations. These improvements are driven primarily by the growing strength of Ford’s global products, continued cost structure improvements and the gradually strengthening global economy.
Ford Credit will continue to be solidly profitable for 2011 but at a lower level than 2010, reflecting primarily a lower occurrence of this year’s favorable factors.
By the end of 2011, Ford expects to move from a net Automotive debt position to a net cash position.
Overall, Ford said its performance gives it great confidence going forward. It has aggressively restructured its business to be profitable in the current environment and, going forward, it will continue to:
- Expand its business, particularly in the growth regions of the world, such as China and India
- Improve its overall cost structure and achieve competitive costs while strengthening further its operational excellence
- Take actions to strengthen its balance sheet and become investment grade
Source: http://www.ford.com/ , www.yahoo.com
Technical Analysis
Source: http://stockcharts.com
Ford is trading above its 13 day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.
Ford is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.
The MACD for Ford currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0 which implies that the underlying moving averages are trending higher.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Aug-9-2010 | symbol | Share, $ | $ Mn | 2010 | 2011 | 2010 | 2011 |
| Volkswagon AG (ADR) | VLKAY | 18.49 | 45.07B | 26.93 | n/a | 0.32 | n/a |
| HONDA MOTOR CO. LTD. | HMC | 32.12 | 60.63B | 19.72 | n/a | 0.60 | n/a |
| Nissan Motor Co. Ltd | NSANY | 14.65 | 31.56B | n/a | n/a | 0.37 | n/a |
| Auto & Truck Manufacturers Median | 45.75B | 22.14 | n/a | 0.43 | n/a | ||
| Ford Motor Company | F | 12.41 | 44.18B | 8.55 | n/a | 0.38 | n/a |
Source: Thomson Financial
Insider Trading Activity
| NET SHARES PURCHSE ACTIVITY
Inside Purchases – Last 6 Months |
||
| Shares | Transaction | |
| Purchases | n/a | 0 |
| Sales | 1,599,140 | 10 |
| Net Shares Purchased (Sold) | (1,599,140) | 10 |
| Total Insider Shares Held | 797.75M | n/a |
| % Net Shares Purchased (Sold) | (0.2%) | n/a |
| Net Institutional Purchases — Prior Qtr to Latest Qtr | |
| Shares | |
| Net Shares Purchased (Sold) | 19,083,000 |
| % Change in Institutional Shares Held | 0.93% |
Source: Yahoo Finance
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