Ford Reports Another Strong Quarter: Looking Forward to Long Term Growth

| About: Ford Motor (F)

One of our top buys, Ford Motor Company, recently reported 3Q earnings (see conference call transcript). Specifically, the Company reported a loss of $0.01 per share, which significantly outperformed the Street's estimate of a loss of $0.46 per share due to strong international and financial service performance as well as lower losses in North America . This is the second quarter in a row that F has outperformed the Street. In 2Q, F reported a profit of $0.31 per share, while the Street was looking for a loss of $0.34.

Importantly, Ford reduced its "cash burn" (i.e., cash spent on restructuring, among other items) guidance to $12 – $14 billion from $17 billion through 2009. With earnings near break-even and outperforming the Street and the cash flow picture improving, it is becoming more apparent that Ford is executing on its strategy.

Despite the soft auto sales environment, we are excited about the F story due to the turnaround prospects. We think the shares are a very good buying opportunity at the current $8.20 level and see upside into the mid-teens assuming continued execution on all fronts. Specifically, we like Ford's improving cash flow and product cycle, capacity reduction initiatives, cost savings associated with the proposed new UAW contract, and liquidity position. Subsequent to the sale of Land Rover and Jaguar, we believe F will become a smaller, more profitable company producing quality cars, trucks, and SUVs domestically and abroad.

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