Ford (F) has performed strongly in 2013 but the stock recently took a beating after the company gave out a timid profit outlook. In the year end update, Ford's CFO, Bob Shank, warned of lower than expected margins in 2014 as they plan to introduce 23 new car models in 2014. Consequently, the blue oval had to revise its profit outlook downwards. Moreover, the rumors of Alan Mulally, Ford's CEO, quitting have further put downward pressure on the stock.
However, I think Ford's future looks bright and these reasons aren't enough to convince anyone that they should give up on Ford. Therefore, I think the recent drop is a great entry point for both new and old investors. Let's take a look at three convincing reasons which makes Ford a great buy.
Expanding Presence In The Emerging Markets
Ford is also signs of growth in two key regions -- China and India. Ford sold all-time high 14,935 vehicles in the month of October in India, signifying a year-over-year increase of 36%. The company also shattered records in China by selling 99,157 vehicles in November, up 47% from last year while year-to-date sales jumped 51% to reach 840,975 vehicles.
In India, Ford's sales were primarily driven by the success of the company's new EcoSport, while in China; sales were propelled by Ford's impressive arsenal of SUVs like the Explorer, the Edge, and the Kuga. Given that India and China have a combined population of over 2.5 billion and have a growing middle class, Ford will be launching numerous new cars in 2014 to gain market share. The success has been so incredible that the blue oval expects to sell one million cars in Asia in 2013.
Ford has finally realized the importance of expansion in emerging countries and is catching up to its peers in key Asian markets. Inspired by its success in Asia, the company has now turned its attention to the Middle East and African markets. Ford expects these markets to be one of the biggest growth drivers, thus the company has assigned high priority to them. Ford and its Lincoln luxury brand announced that it will be launching 17 new or upgraded vehicles in the Middle East and Africa over the next two years. Ford didn't reveal its complete portfolio, but the company did confirm that it will be offering the highly successful Ford Fusion and EcoSport to its customers.
Ford's sales in this market have already grown by 60% in the last four years, and the company expects an additional increase of 40% before the end of 2020. Presently, Ford sells about 200,000 vehicles annually throughout the Middle Eastern and African segment, commanding a tiny market of 5%. Out of this, the Middle East accounts for 30% of its sales while North Africa and sub-Saharan Africa accounts for 13% and 10% of sales, respectively.
According to Boston Consulting Group, sales in the Middle East and Africa market can grow from 3.7 million units in 2013 to nearly 5.8 million units in 2020. To capitalize on this growth opportunity, Ford will be combining four separate regions -- North Africa, sub-Saharan Africa, South Africa and the Middle East -- into a single business unit. This unit will comprise of 47 markets and its functioning will be overseen by Jim Benintende, a 36-year Ford veteran.
In order to cater to the needs of its customers, Ford will also improve its dealer network and expand parts accessibility throughout the market. Ford claims that the expansion of dealer network was the primary driver behind its 20% year-over-year growth in sales in this segment, and further enhancement should boost sales.
Strong Domestic And European Performance
Ford has been performing very well in its homeland as sales of its new F-150 SVT Raptor are among the many factors driving growth in the U.S. The impending launch of Ford's next Fusion is also expected to benefit the Blue Oval, and the car might even dethrone Toyota Motor's Camry as the market leader of mid-size cars. Furthermore, Ford will be launching 23 new vehicles in the U.S.A. in 2014. The U.S. auto market is poised to grow for a fifth straight year as the analysts are projecting sales to reach 16 million and Ford looks set to capitalize on this growth.
Moving on to Europe, the revival of the economy has helped Ford increase its sales in its 19 traditional European markets. According to reports, Ford's total vehicle sales jumped 1.7% to 90,300 units in the month of October, marking the fifth successive month of sales growth. In addition to that, the Blue Oval will also be launching Transit Connect and Tourneo Connect in 2014 to drive sales higher.
Mullaly's Legacy Will Remain Intact
Since Ford's board recently confirmed that Mullaly will stay with the automaker through 2014, I don't think there is any reason to panic. In fact, I don't think investors should worry even if Mullaly leaves after 2014. No doubt Mullaly has been the main reason why Ford's stock is up nearly 88% since he took over, but this doesn't mean that the automaker will not survive without him. While it isn't official, I think it's highly likely that current COO Mark Fields will become CEO of Ford upon Mulally's exit. Fields has been with Ford through thick and thin and will be the ideal replacement for Mullaly. This means that Ford will not have to spend millions in its quest to find a new CEO as they already have a proven veteran who can proficiently keep Mullaly's legacy intact.
Ford has turned its business around quite successfully in North America while Europe is also picking up. Now the company is also focusing on the emerging markets, which is good news as Ford has always suffered because of neglecting the importance of these markets. Also, given the number of new cars that Ford will be launching worldwide, investors can expect strong top and bottom line growth in the coming years. Thus, I believe the recent price drop is the perfect entry point for opportunistic investors.