Ford Gets First 'Very Juicy' Rating: We Love The New F-150 And Initiate With A $28.50 Price Target

| About: Ford Motor (F)


Ford's new F-150 will be a massive success as Ford takes its number 1 seller into the future.

Ford's stock trades at around 10x forward P/E, and based on FY 2015 projections, could be worth as much as $28.50.

Ford would be the only automaker stock we would potentially buy at this time.

By Parke Shall

We agree with so much of the sentiment on the web surrounding Ford (NYSE:F) and where it's going to be heading over the next couple of years. Widely regarded as the best bet in the U.S. automotive sector (we are wildly bearish on GM, as you can read here), Ford has the added class of having had survived the housing bubble financial crisis without the help of you - the American taxpayer.

I'm not an American, and that still resonates with me.

Not to go off on a tangent, but that's more than we can say about General Motors (NYSE:GM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS).

For the first few years living in the States, I couldn't for the life of me figure out what this obsession Americans have with their cars is. I realize that you want to buy from American automakers, but the sheer size of the vehicles (compared to Europe) is astonishing. Bigger is better, apparently. I routinely see people in downtown Manhattan driving automobiles with tyres so large you could fit a person in them.

That's where the new F-150 comes in; it looks to be heading in the direction of smashing class, alongside of size and power.

Without trying too much to sound like an advertisement, the heart and soul of the Ford Corporation is its "F" series of pickup trucks, which have been the best-selling truck line in the U.S. for 37 years and running. The company now sells an enormous estimated 60,000 F-150s per month. That's what makes the company's massive overhaul of the F-150 such a big deal.

The big Ford headline today was that the company had started on an eight-week overhaul of its F-150 plant to make way for the new F-150 models, which are going to be made using aluminum. Ford was the first to declare it was going to use aluminum, GM quickly followed, and this week, Chrysler said it wasn't interested. We think Ford is going to be the trendsetter, and look to see aluminum used in far more vehicles over the coming years.

The company has 8 weeks to roll out everything it needs to begin producing the new F-150.

The company is engineering the old "switcheroo" between its Dearborn, MI plant and its Kansas City, KS plant, according to USA Today:

Dearborn is the lead plant and thus the guinea pig. Workers on three crews built F-150s flat out until the last one rolled off the line Saturday about 1:30 a.m. and Kansas City will continue to build the 2014 model through the end of the year, so dealers should not run out of the 2014 model any time soon. The new truck goes on sale later this year.

Dearborn Truck plans to resume production Sept. 22 when two crews of workers return. A third crew will be recalled Oct. 20 when the construction is to be fully completed. They will start with pre-production trucks. The plant is scheduled to be building production models at full line speed by the end of the year.

The Kansas City plant will shut down in early 2015 for its changeover, which should take less time because Ford already will have validated many of the processes in Dearborn, Hettle said.

The benefits of aluminum are plenty; it shaves off about 600-800 pounds per vehicle, it helps with petrol mileage, and it's cost-efficient for the company.

Ford's expecting the production line model to roll off of the plant floor by mid-October of this year. It wants the F-150, presumably, to compete with trucks like the Ram 1500 (Chrysler). Ram's obvious advantage is that it gets significantly better petrol mileage.

Not only do we like Ford's vehicles, but we also like Ford's stock.

The Peel's Feel:

We love Ford about as much as we love being in the USA.

We believe the new F-150 is going to finish the beginning stages of an entirely new Ford; built out of the rubble of the financial crisis, and capable of getting Americans feeling nostalgic about their vehicles the way that so many tell me they feel about their Mustangs manufactured in the 1960s.

We're inquisitive if people around the globe will feel the same way as Mustang eventually rolls out to Asia and Europe. It's a different breed of automobiles overseas; the focus is on petrol mileage, compact size, and the ability to maneuver quickly. Mustang could go one of two ways; it could become the next big thing, or it could be seen as far "too much" for European drivers.

Rolling out the F-150 and the Mustang overseas is likely to cost the company some capex, so analysts are looking for a bit of an earnings drop this calendar year. However, moving into 2015, we expect the benefits of the rollout to far outweigh the initial costs. Ford has invested in countries like China and South Africa; now, Ford is investing in itself.

We think the F-150 idea has little chance to fail. Everything that we've read regarding both the financial aspects and the consumer reviews from the first glance at the model seems positive.

F Chart

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Our price target matches that of Stifel.

We rate Ford as VERY JUICY (STRONG BUY), and we're basing our $28.50 price target on the following:

Analysts have the company earning $1.90 to $2.00 in 2015; a reasonable multiple on those earnings puts the company easily past $28 (15x P/E = $28.50). The company also has a yield of 2.91%, according to Seeking Alpha, so you earn while you're waiting.

For the U.S. automaker that we think holds the most promise, we're befuddled as to why it's currently trading at around 10x forward earnings. We feel the polar opposite about Ford as we do about General Motors, and that's why, even in this questionable economic climate, we think Ford is a buy here.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.