Revisiting Ford: Look At What's Changed In The Past Year

| About: Ford Motor (F)

I first wrote about Ford (NYSE:F) last July when shares were trading around $14. Now, they're in the low $10's despite every metric improving for the company. The markets are a discounting mechanism, and there are certainly some potential headwinds in the economy, but the fear is a bit overdone. Let's tick off a few positives for Ford since this time last year:

More Sales for Ford and for the Industry

North American auto sales are the key metric, and they've been increasing since 2009. Here are the average U.S. auto sales from the past five years:

  • 2011: 13.0 million
  • 2010: 11.8 million
  • 2009: 10.6 million
  • 2008: 13.5 million
  • 2007: 16.5 million

The 2012 run rate has continued this trend. In Ford's most recent sales call, they peg the 2012 seasonally adjusted annual rate (SAAR) in the "high 14 million total vehicle" range. That's beginning to approach the average sales rate since 1980. The trend is certainly in our favor.

Ford's market share continues to be around 16%, this despite Toyota's (NYSE:TM) climb over the past year as they've recovered from the tsunami and auto safety concerns. Ford's piece of the pie has held steady, but the pie is dramatically increasing.

Investment Grade Credit Rating

In a dramatic turnaround from a few years ago, Ford has now reached investment grade status. In late May Moody's bumped them up to Baa3. This followed Fitch's upgrade from the previous month. This was a tremendous accomplishment for the company and for Alan Mulally. As Ford itself has said, this will allow the company to:

• Have more certain and lower cost access to liquidity from banks and investors without having to pledge our assets as security

• Invest in new products and plants, thereby creating jobs

• Fund pensions for our workers and dividends for our stockholders

• Finance customers' vehicle purchases at lower, more competitive rates

Dividend Reinstated

Ford's improved financial situation allowed it to reinstate its dividend in December 2011. Ford is now paying out 20 cents per year, which works out to a current yield of 2%. Mulally gave an interview to Seeking Alpha in February and discussed the possibility of increasing their dividend or instituting a share buyback plan if results continue to impress over the next year or two.

Each one of these three improvements would be impressive in their own right. Yet the stock trades 40% lower than it did one year ago. There are a number of potential economic problems out there with the situation in Europe and a slowdown in the U.S. Ford is also finally dealing with their pension problems by offering lump sum payouts to former employees and retirees. They're now in a position to proactively tackle this problem, and their generating enough operating cash to reclaim their position as a great American company.

Disclosure: I am long F.

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