There have been many a number of key developments recently in the American motor industry, and after the exhaust has settled it can now be clearly seen that Ford (F) offers a great opportunity for long investors. The corporate financials corroborate this story, with Ford guidance stating it anticipates matching the $8 billion in revenue it earned last year, and the losses from Europe seem to have stabilized and reversed course, and are being augmented by rising sales and market share in North America, the U.K. and greater than expected sales volume and growth Asia, allowing for significant upside movement.
Sales Data That Literally Drives Stock Prices
The American penchant for choosing function over form sees no equal when placing the story of the truck under the lens of history, and both GM and Ford have introduced highly competitive offerings in this market with the Sierra and Silverado and the F-150 series of vehicles, respectively. The current chapter of this saga can be understood more clearly by examining recent sales data for these two manufacturers, with Ford selling a record 71,000 F- series pickups in August, and clocking a 22% year-over-year increase from 2012. The American truck market is forecast to total over 2 million sales this year, riding on the back of a slowly recovering housing market. The Federal Reserve bond buyback program will now have to be kept in place well into 2014 as a result of the Congressional stalemate, giving a longer time horizon to facilitate significant recovery of that battered sector of the American economy. Due to the large linkage between interest and loan rates, vehicles will also garner a continued financing reprieve for the next 4-6 months, and this lynchpin, in combination with previously mentioned factors, will aid Ford as it flirts with the 700K sales number for its F- series this year in North America.
It's A Fiesta in the UK, Pun Intended
The United Kingdom has exhibited an interesting penchant of its own recently, with sales of Ford's Fiesta and Focus, plus other models, topping all other auto manufacturers in the prior nine months, totaling almost 250k sales, which is up from the 225k it posted in the correspondent nine months of 2012. The 13.3% market share the blue oval has earned positions Ford to continue this trend, with the Fiesta supermini and Focus earning the distinction of being the 1st and 2nd most purchased cars in the UK.
Growth of a Middle Class, and an Auto Market
The most rapidly advancing component of Ford's business is, predictably, in China, where the auto manufacturer has seen sales growth progressing faster than anticipated, as it is now up 50% from a year ago. The developing Chinese economy also affords substantial growth opportunities, as 58 in 1000 people own cars in China, compared to 800 out of 1000 in the U.S. The fact that almost 60% of the population regards purchasing an automobile to be a priority on par with paying rent, the extreme appetite for cars the Chinese economy is indicating makes these recent sales numbers even more exciting. The rapid demand side growth is expected to hit 28 million vehicles by 2020, and with Ford's recent history of capturing and growing market share, the blue oval's future in Asia seems bright.
Ford Flexes it Flex Fuel Options
The laggard in American automotive design has long been the output and emissions segment of the offerings, with Toyota's Prius and Nissan's Leaf having established themselves as the leading hybrid and purely electric products in the market. This is no longer the case today, as Ford's fuel efficient EcoBoost engine offers significant savings for traditional engine enthusiasts who are feeling the pinch of rising gasoline costs, and Ford's Fusion and C-Max sedans have cut neatly into Toyota and Nissan's market share. The sales growth in the Fusion and C-Max line has been substantial this year, with the 49k vehicles sold so far in 2013 equal to more than 500% of the sales generated last year in the same time allotment.
The Bottom Line
The past three months have seen the successes of Ford's European unit and its dominance in the U.K. auto market, a strong 6% uptick September in N. American sales while other majors reported sales declines, a true sales entrance into the hybrid and highly fuel efficient market segments, sales of the F- series set a new record, and the planning and movement into the vast Chinese markets being undertaken. Recent technical data indicates that Ford was up last on weaker than average volume and displaying a low RSI, which means that stronger volume and a higher RSI can rapidly drive shares of Ford higher after this slight pullback seen in mid-week. These facts, when taken together, indicate that there is going to be significant growth at Ford in the next 6-12 months, and that a large, near-term upside exists in the current stock price.
Additional disclosure: I am not a CFA. The information and data presented in this article was obtained from company documents and/or sources believed to be reliable; however, it has not been independently verified, and thus the author cannot guarantee its accuracy. Please perform your own due diligence regarding investments, as I am not responsible for the investment decisions you make. Thanks for reading, and may the force be with you!