Ford Motor Company (F) has been a a beacon of light within the troubled automotive industry. Last year while fellow automakers General Motors and Chrysler were being bailed out by the government and filing for bankruptcy, Ford Motor Company (F) stood strong and focused on innovating its product line while reducing its runaway cost structure. The result has been award-winning vehicles, like 2010 Motor Trend Car of the Year Ford Fusion, and a stronger balance sheet. This morning’s earnings report from Ford (F) confirmed anecdotal evidence that the Ford has become a model (T) citizen on the American corporate landscape. We feel strongly about the stock’s prospects going forward.
Ford Motor Company (F) reported earnings per share of $0.48 (excluding $102 charge relating to the sale of Volvo, which would put earnings at $0.43/share), well above the consensus estimate of $0.38. Net income grew by 68%, also topping analyst estimates, but revenues missed by a whisker. At $1.7 billion, net income was highest for the third quarter since 1990. The company noted an improved cost structure driving wider margins despite a decrease in global demand.
Perhaps more important to note was Ford’s progress in reducing its debt load. Last year the company set a goal for itself: bring cash in line with debt by the end of 2011 in an effort to restore its investment grade status. At the end of September, cash stood at $23.8 billion compared to debt at $26.4 billion, and Ford is well on its way to meeting its goal a full year early. Chrysler and GM used bankruptcy to shed large amounts of debt, and now Ford is hell-bent on catching up, the responsible way. Also, as a part of restructuring, the auto companies are no longer responsible for payment of retiree health benefits. That massive cost has been shifted over to the unions.
Perhaps more important to note was Ford’s progress in reducing its debt load. Last year the company set a goal for itself: bring cash in line with debt by the end of 2011 in an effort to restore its investment grade status. At the end of September, cash stood at $23.8 billion compared to debt at $26.4 billion, and Ford is well on its way to meeting its goal a full year early. Chrysler and GM used bankruptcy to shed large amounts of debt, and now Ford is hell-bent on catching up, the responsible way. Also, as a part of restructuring, the auto companies are no longer responsible for payment of retiree health benefits. That massive cost has been shifted over to the unions.
Ford Motor Company (F) actually opened lower this morning following the revenue miss, but investors showed aggressive demand for shares and the stock closed 1.66% higher on the day. Right now, I see a great opportunity to gain long-term exposure to the strongest company in a resurgent American auto sector.
