3 Things for Ford's Stock to Soar

Over the past few years, Ford Motor (NYSE: F  ) has given us an American comeback story to root for. In my opinion, it's completed its turnaround, recently reinstating its dividend and returning to investment grade. It's done a remarkable job cleaning up its balance sheet since the depths of the Great Recession. North American sales are up, and the company has made an effort to gain ground in China, trying to catch rival General Motors (NYSE: GM  ) . The F-Series continues to be the best selling truck, too.

So what's the next if Ford wants to kick its stock price into overdrive? There's a multitude of things Ford could do, but let's focus on three: strong sales, an improving balance sheet, and the Lincoln's renovation.

What's moving
We know Ford dominates in truck sales, and I expect that trend to continue. Chew on this: The F-Series had its 16th consecutive year-over-year monthly sales increase and its best November since 2005. Ford has also seen four months in a row with more than 50,000 vehicle sales. As investors following Ford, we expect that type of success in truck sales, but what about small cars?

In November, the Focus, C-Max, and Fiesta combined for 26,848 units, a 76% increase compared with last year and good enough to give Ford its best November in 12 years. The Focus alone saw a 56% increase to 18,312 units.

Crossover vehicles also had a nice gain with the Explorer and Edge increasing 15.9% and 4.7% respectively.

Green is trending
Ford is trying to capitalize on the emerging hybrid market with its C-MAX, which saw 4,848 sales in November, a 52% increase over October and good for its best month ever. Those two months combined saw 8,030 units sold, topping Toyota's (NYSE: TM  ) Camry Hybrid to become the fastest-selling hybrid at launch.

Companywide sales are up 6% from a year ago, and that trend is expected to continue, with Ford's announcement of 2013 first-quarter planned production up 11% from last year

Improving financials
Take a look at the remarkable improvement at Ford over the past two years.

 

Ford's profitability has come roaring back from the depths of the 2008 recession. In four years, it has completely reversed its net income trend and with strong sales recently will continue to produce bottom lines that investors love.

With such improvements in net income, you'd expect margin to follow, and it has -- jumping from 2.2% in 2009 to 14.8% last year.

Next, let's check how Ford's debt compares with capitalization.

Again, much improved since the recession, and 2012 is shaping up to be similar to 2011's level. This is a really good sign, as Ford has its hands full trying to salvage sales in Europe and catching GM's market share in China. The improved long-term debt of capitalization allows Ford to spend more cash on marketing for incremental sales and, maybe in the future, an increased dividend.

Ford has made strides in improving its financials and is convincing consumers it's producing a vehicle worth buying. What's next on its agenda?

Hello again
Ford's going to do its best to copy its recent sales success over to its all-but-dead luxury brand, Lincoln. Sales of Lincolns peaked in the '90s and have been miserable ever since, declining 60%. The brand's renovation begins with releasing the new MKZ sedan this month, and Ford hopes its unique design, colors, and technologies can help sales improve by double digits.

Dealers have said pre-orders of the new sedan are the highest for any Lincoln since the Navigator in the 1990s. Its reintroduction campaign began on Dec. 3 and is stretching across magazines, newspapers, mobile apps., and TV commercials, including a Super Bowl ad.

Time will tell whether Ford's luxury brand can compete with Mercedes-Benz, Cadillac, BMW, or Audi, but any sales gains will benefit the brand. But it's clear with all the good news lately that Ford is doing a lot of things right. Alan Mulally had a vision in 2006 when he was introduced as CEO. He created synergy in a company that was divided and lost. He created efficiency and focus with the "One Ford" initiative. Mulally is the industry's best CEO and will continue making great moves for investors.

I believe the good news will keep rolling in for Ford and the stock price will prove to be one of 2013's best bargains.

Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Simply click here to get instant access to this premium report.


Read/Post Comments (3) | Recommend This Article (9)

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  • Report this Comment On January 05, 2013, at 1:43 PM, NOTvuffett wrote:

    I don't even know where to start with this one. I have never liked Ford vehicles, but it was a well managed company. They didn't need a bailout because they took on tremendous debt to get through this span. And they have made tremendous strides in discharging this debt.

    You think about your grandma riding GM down to nothing or maybe she had some funds in Chrysler bonds, then you tell me how much Ford sucks.

    I don't expect much out of Ford in the short term, but i think it is a keeper. Add when low, sell some when high if you want.

    disclosure: I do own some F stock

  • Report this Comment On January 09, 2013, at 11:06 AM, SkepikI wrote:

    I am Long F and for good reason, only some of them outlined above. I had my doubts when Mulally was recruited from Boeing where he got little credit for the 787 project decisions that is now revolutionizing BA and air travel. Great management shows, it just sometimes takes a while. As the total damage to US from GM and Chrysler, ummm I mean Fiat becomes clear I expect business to flee to Ford. Another reason I am long F

  • Report this Comment On January 09, 2013, at 12:59 PM, TMFTwoCoins wrote:

    @Skepikl

    Great comment, very few followed Mulally at Boeing. I happened to, by luck, because I was born in Wichita, KS. With Boeing such a huge part of our economy, locally he was known for great things he accomplished there.

    One of the reasons I'm still long F is, in my opinion, it's still undervalued. If you do a simple DCF, it shows a value of around $19.

    I'll be digging into that for an upcoming article, stay tuned.

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