Ford Motor Company (F) is one of the world's largest automakers. It sells under the Ford, Lincoln, and Mercury brands. This stock has pulled back from the 52-week high of about $16, and it now just trades around $12.50 per share. While the recent market rally has taken many stocks to overbought levels and pushed some price to earnings multiples way past the market averages, Ford looks like a real value with plenty of upside for long-term investors. Here are 6 reasons why investors should consider Ford shares for future gains:
1) Ford recently initiated an annual dividend of 20 cents per share, which provides a yield of about 1.6%. While that might not seem exciting, it is another sign of Ford's turnaround and improving balance sheet. Furthermore, with earnings estimates for 2012, coming in around $1.50 per share and even higher for next year, there is plenty of room for Ford to increase the dividend in the future.
2) U.S. auto sales are setting records and have momentum that could last for years. Ford's February sales were up about 14%, which easily beat analyst expectations of a 9.4% increase. Ford truck sales (which have high profit margins) had the biggest gains with an increase of over 20%. These gains are even more impressive when you consider that oil prices were high and rising into the month of February.
3) Compared to General Motors (GM) and other automakers, Ford has less exposure to the slowing economy in Europe and China. According to a recent article, GM has lost about $15.6 billion in Europe since 1999. General Motors owns the "Opel" brand in Europe, which has been losing money and is being impacted by the weakening European economy. China has been showing signs of an economic slowdown and China is GM's biggest single market, so that could lead to additional downside risk for GM shares.
4) Ford is making fuel efficient cars and designs that consumers want. The Ford Escape has been recently re-designed and it is poised to hit showrooms in the next couple of months. The highly fuel-efficient and affordable Ford Focus has become a popular choice as gas prices rise, and this model contributed 40% to the company's total growth. The recently re-designed Ford Explorer has also become another sign of Ford's ability to launch successful products.
5) Led by CEO, Alan Mulally, the Ford management team been delivering results. Mr. Mulally has successfully guided Ford through a very difficult period. In the past, he served as President and CEO of Boeing Commercial Airplanes, and has also received a number of management and leadership awards.
6) While the average stock in the S&P 500 Index currently trades for about 13 times earnings, Ford shares trade for about 8.5 times 2012 earnings, and only about 7.3 times forward earnings.
Here are some key points for F: Current share price: $12.51 The 52 week range is $9.05 to $16.18. Earnings estimates for 2012: $1.47 per share. Earnings estimates for 2013: $1.70 per share. Annual dividend: 20 cents per share which yields 1.6%
General Motors, Inc. has upside potential, but it did receive bailout funds from the U.S. Government and it does not pay a dividend. Those are two large advantages that Ford has now. Many investors are still concerned with the fact that the U.S. Government is still a major shareholder in the company and some point it will likely sell its shares. That could put significant pressure on the stock when the shares are being sold, and it could keep a lid on the shares until a sale takes place.
Here are some key points for GM: Current share price: $25.09. The 52 week range is $19.00 to $33.47. Earnings estimates for 2012: $3.68 per share. Earnings estimates for 2013: $4.59 per share. Annual dividend: None
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I am long (F)