Ford's (F) global battle for profits will be successful in 2013 as long as North America and China continue to remain profitable. Those two regions will have to carry the company while Europe falters through 2013. Can the company do it? Let's take a look where it is now and what others think of it.
Ford's Cost Cutting Efforts
Ford has done a great job lowering its manufacturing costs through hiring more entry level workers and boosting its capacity to 114%. Entry level workers make about $12 less than veteran workers. Here's the difference in workers for Ford and how it saves labor costs:
Workers can earn $19.28 an hour after two years.
- Traditional unskilled UAW workers at Ford earn just over $28 an hour.
- The 114% capacity utilization is higher than anytime in the last 30 years.
Ford in China
Ford sales has been on a tear in China with sales up 14% year over year and 48% year over year just for October alone. The Ford Focus is the best selling family passenger car in China and demand for these types of passenger cars from Ford are up more than 60%. Look at these statistics:
- Focus sales continue to break records for Ford, with 33,614 wholesale units sold in October.
- The Ford Edge is likewise performing well, up 77 percent year to date after excellent October sales.
- Ford's passenger car joint venture in China CFMA also had a record October, up 65 percent compared to October 2011 and 22 percent for the year.
Ford is a rare company this quarter having beaten analysts on earnings and revenue. Analysts have been turning bullish on Ford:
- Analysts at UBS AG raised their price target on shares of Ford to $15.00 with a buy rating on the stock.
- Analysts at Craig Hallum upgraded shares of Ford from a "neutral" rating to a "buy" rating with a price target to $14.00.
- Jefferies Group reiterated a "buy" rating on shares of Ford with a PT of $14.00 also.
- Goldman Sachs increased their target price on of Ford to $15.00 with a buy rating.
With all these analysts turning bullish on the stock and giving it room to climb almost 50%, it may be a good time to consider investing in the company.
Europe Still Looms like a Sore Thumb
North American sales had to carry Ford while Europe continues to fester, having the lowest sales in the past 20 years. As an investor, I am getting a better picture of Ford and what it takes for the company to stay profitable. The company has forecasted severe conditions for Europe in 2013. Therefore, in the next year, Ford will have to keep its North American profits strong to counteract what is predicted to be a bad 2013 in Europe. If North America slows to drastically, it could really hurt Ford in the coming year.
So now I see the battle Ford is facing in 2013. It could be a very good year for the company if North America and China continue stay strong. These two regions will carry the company even if Europe falters next year.
For the last three months, Ford has been moving up in a bullish peak and valley pattern. It has been rising between the upper and lower Bollinger Bands while using the 50 day MA as support. The RSI is very bullish and following a very predictable pattern. The lows are very bullish and look like they will remain that way. The MACD also has stayed in the bullish region. There is no reason not to believe the stock will not continue to move up from here.
The Options Play
The stock is presently trading at 11.14 and I believe the next few months will give the stock an opportunity to move up. Since option prices for Ford are so reasonable, the short term income play would be a simple straight options buy.
- Buy the December 2012 call with a strike of '12' priced at $0.04
- Net Debit to Start: $0.o4
- Maximum Profit: unlimited
- Maximum Risk: net debit
- Maximum Length of Trade: 1 month
Reasoning behind the Trade
- Trade with the trend
- Ford's North American & China sales will carry the company in 2013