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Tesla Motors Inc. and Ford Motor Company Hit Today's Headlines

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was trading 60 points higher, or 0.35%, by midafternoon as investors brushed aside worries surrounding Russia and Gaza and focused instead on economic data and earnings reports. One positive economic takeaway for investors was that sales of existing homes rose 2.6% to a seasonally adjusted annual rate of 5.04 million last month, according to the National Association of Realtors. Data showed an increase in first-time buyers and sales increasing across all four regions in the U.S. market, which are good signs that the housing market is gaining momentum again.

With that in mind, here are a couple industrial companies making headlines today.

Outside the Dow, Tesla Motors (NASDAQ: TSLA  ) announced it has halted production at its California assembly plant for two week to install additional robots that will enable the electric-auto maker to accelerate production of its Model S. Tesla hopes the $100 million upgrade will boost production by 25%.

Company spokesman Simon Sproule told Reuters, "This represents the single biggest investment in the plant since we really started operations and enables us for higher volumes. It gets us ready to build X and to do it on the same line as the S."

Source: Tesla Motors.

The development, while costly, represents two positives for Tesla investors. First, as the automaker was producing roughly 700 Model S units per week at the end of the first quarter, it needed to increase that rapidly to hit its goal of producing 1,000 units per week by the end of 2014. Second, it's a solid sign that production of the Model X won't be pushed back any further.

As Tesla's second-quarter letter to shareholder approaches, investors hope the automaker met its goal of producing between 8,500 to 9,000 Model S vehicles during the three-month period, with delivery of 7,500.

In other automotive news, Citigroup on Tuesday reaffirmed its buy rating on Ford (NYSE: F  ) stock. The bank placed a $21 price target on Ford's stock, which is up from Citigroup's previous $19 target. Ford's stock price has recovered from a sell-off early this year, when some investors headed to the door after hearing the automaker would be less profitable due to rising costs associated with the launch of 16 new vehicles in the United States.

Despite the lower than desired profitability, it'll still be a strong year for America's second-largest automaker. Furthermore, the vehicle launches will help spur demand, as Ford's North American vehicle sales fell roughly 1% in the second quarter from the same period of 2013.

One thing for investors to look for during Ford's second-quarter presentation on Thursday will be its North American operating margin. It's no secret that North America drives the vast majority of Ford's profits; if its operating margin takes a hit, the effects will be felt on the bottom-line earnings. In the last quarter, Ford's North American operating margin checked in at 7.3%, and investors would like to see that figure rebound to between 8% and 9% for the second quarter. 

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  • Report this Comment On July 23, 2014, at 8:49 AM, FordMan26 wrote:

    "The development, while costly . . . . " This shows what rose colored glasses people are wearing when they look at Tesla. $100mil for a plant upgrade is peanuts. And a capacity increase to 1,000 units per week is paultry. Standard vehicle assembly plants build about 200,000 units per year or 800 per day - and that's on one shift. Go to two shifts like Ford is running in many plants and you double that output. I would guess that if Tesla wanted to produce/ had annual demand for 200,000 units per year they would have to completely gut their plant and start over with it's layout . . . . not to mention require 2-3 times the floor space to fit all the in-process vehicles and parts which may mean an entirely new site

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Daniel Miller

As a Motley Fool Industrial Specialist, I use my marketing and business background in the automotive industry to evaluate major automakers and other large industrial corporations. Follow me on twitter for tweets about stocks, cars, sports, and anything I find amusing.

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