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I made my first investment in Ford (NYSE:F) earlier this year for reasons articulated in these pages. I tend to avoid unionized cyclical industries due to their history of extreme volatility and numerous bankruptcies (Steelmakers, Airlines, Auto Companies, etc.). In fact, it was my first investment in a U.S. auto company since I bought Chrysler as it turned around with the help of a government bailout in the 80s when I was a teenager (and Iacocca and the K car paid for my first year of college). That being said, the earnings that Ford just released are impressive.

Key highlights from Ford's earnings report:

  • EPS came in at 40 cents a share, 3 cents above estimates.
  • More impressively, revenue rose 10% Y/Y to $35.8B, significantly above the consensus estimates of $33.5B. A very solid performance given Europe saw a 20% decline in sales.
  • Ford sold almost 1.5mm vehicles in the quarter, over 750,000 in North America.
  • The company recorded the highest profit for North America in a decade.
  • Ford Credit reported pretax income of $507mm for the quarter, up significantly from $452mm in this quarter last year.

4 additional reasons Ford can go higher from $13.50 a share:

  1. This is the fifth straight quarter that the company beat earnings estimates. The average beat over consensus over that time frame has been north of 15%.
  2. The stock is cheap at under 8x 2014's projected earnings and auto demand in North America continues to be robust.
  3. Analysts expect the company to grow sales at 5% to 6% annually over the next two fiscal years (and that may be revised up based on these latest results). The stock sports a five-year projected PEG of under 1 (.88).
  4. F also yields over three percent (3.1%) and sells for approximately 6x operating cash flow.
Source: Ford Is Finding Its Groove