Ford Motor Company (NYSE:F) has been on an impressive run lately as the company benefits from an improved product portfolio, growing demand in key markets and strong financial performance. Even though the stock has risen by more than 90% in the last year, the bull ride is far from over for this iconic American automaker.
The Products
The average age of trucks on the road is relatively high at around 13 years, and housing activity is positively correlated with truck sales, so pickups will continue benefiting from an improving housing sector over the coming quarters. General Motors Company (NYSE:GM) is confirming the trend as the company is reporting healthy results in pickups too: Silverado sales gained 26% and Sierra sales rose 21% in the first half of the year.
The Fusion has been a big success for the company, not only in terms of sales, but also when it comes to improving consumers´ perception about the brand and the quality of the products that Ford Motor Company (NYSE:F) manufactures. The Fusion has won a considerable amount of awards: it has been named “Green Car of the Year,” “Best Car for Families,” and “Best Car for the Money” among other nice things. Building a widely acclaimed car is probably the best kind of free advertising a company like Ford Motor Company (NYSE:F) could hope for.
The Escape was named “Car of the Year” by Popular Mechanics, and international reception for the product has been encouraging too, so Ford Motor Company (NYSE:F) is planning to expand sales in Europe and Asia. If the company can internationally replicate the success it´s having in the US, the Escape could mean a big boost to Ford´s revenues in the middle term.
This has allowed Ford to gain share in the US car market, where Japanese competitors like Toyota Motor Corporation (ADR) (NYSE:TM) and Honda Motor Co Ltd (ADR) (NYSE:HMC) were ahead of American automakers in terms of quality not so long ago. In the first six months of the year Ford has increased its car sales by 11.8% versus a 2.7% growth for Toyota Motor Corporation (ADR) (NYSE:TM) and 6.9% for Honda Motor Co Ltd (ADR) (NYSE:HMC).
Global Performance
The company has done surprisingly well in Asia during the last quarter, operating profits in that region were $177 million versus a $66 loss in the second quarter of 2012 and a small gain of $6 million in the first quarter of this year. This was Ford´s best quarter ever in Asia, and an auspicating sign in terms of future growth prospects.
The company has been investing heavily and building new factories in the region, this is usually a drag on profitability due to elevated starting costs. But results seem to be validating Ford´s decision to bet on Asia: the company sold 27% more vehicles in Asia-Pacific during the last quarter, reflecting mainly the strong performance in China, where sales were up more than 40%.
Even in Europe, where new vehicle sales are at 20 year lows, Ford seems to be moving in the right direction as restructuring plans are already having an effect on the company´s financials. Ford has raised its guidance for its European operations from a $2 billion loss to $1.8 billion in expected losses for the year.
Still Cheap
Ford has made a remarkable turnaround over the last years from multiple points of view: the products are definitively much better; it has gained market share versus the competition and strengthened its balance sheet. Earnings and cash flows have increased considerably, and the company is well positioned for growth in several key areas.
On the other hand, the stock is up by a whopping 90% over the last 12 months, and nearly 30% since the beginning of 2013. Keeping this in mind, investors may be wondering if the automaker still has gas in the tank or if it’s already too late to join the ride.
The main point to consider is that, even after the huge run-up over the past months, the stock is still reasonably valued. In fact, when compared against peers like General Motors Company (NYSE:GM), Honda Motor Co Ltd (ADR) (NYSE:HMC) and Toyota Motor Corporation (ADR) (NYSE:TM), Ford has the lowest P/E ratio, the highest dividend yield and the best track record in earnings per share growth over the last five years of the whole bunch.
Forget about the rearview mirror, investing is about the windshield, and Ford is on the road to more gains.
Bottom Line
Ford is benefiting enormously from booming truck sales in the U.S. and the company is proving to consumers and investors that it can successfully compete is smaller vehicles with products like Fusion and Escape. Financial performance is strong across the board, and the stock is still attractively valued. This automaker is moving forward at full speed.
The article This Automaker Is Firing on All Cylinders originally appeared on Fool.com and is written by Andrés Cardenal.
Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
