American automaker Ford (F) has gained just over 30% this year and it looks like the company has enough fuel in the tank to move higher. Even though Ford's revenue is still about $38 billion lower than pre-recession levels, the company is trading at a tempting valuation of 12x earnings, and if you take a look at its business plans, it will definitely look like a worthy buy.
Solid performance
Ford has been performing very well in its homeland as sales of its new F-150 SVT Raptor are among the many factors driving growth in the U.S. The impending launch of Ford's next Fusion is also expected to benefit the Blue Oval, and the car might even dethrone Toyota Motor's Camry as the market leader of mid-size cars.
Moving on to Europe, the revival of the economy has helped Ford increase its sales in its 19 traditional European markets. According to Ford's latest data, total vehicle sales jumped 4.6% to more than 115,000 units in the month of September, marking the fourth successive month of sales growth. In addition to that, the Blue Oval will also be launching Transit Connect and Tourneo Connect in 2014 to drive sales higher.
The company is also showing signs of growth in two key regions -- China and India. Ford sold an all time high 14,935 vehicles in the month of October in India, signifying a year-over-year increase of 36%. The company also shattered the record in China by selling 93,969 units in October, 55% more than last year. This tremendous feat enabled Ford to sell one million vehicles in the Asia-Pacific region for the first time.
In India, Ford's sales were primarily driven by the success of the company's new EcoSport, while in China, sales were propelled by Ford's impressive arsenal of SUVs like the Explorer, the Edge, and the Kuga. Given that India and China have a combined population of over 2.5 billion and have a growing middle class, Ford will be launching numerous new cars in 2014 to gain market share.
Using technology to its advantage
Furthermore, Ford is using technology to its advantage to push sales higher. As a part of its "green technology" vision, Ford has been investing in "Big Data analytics" for over 15 years for driving business decisions on matters ranging from realistic fuel economy targets and green routing services to the potential availability of rare earth minerals used for powertrains and batteries.
"The company's investments in the field of Big Data analytics have continually increased during the last 15 years," John Viera, the global director for sustainability and vehicle environmental matters at Ford, told attendees of the recent Net Impact conference in San Jose, California. Ford installs over 74 sensors in cars, including sonar, cameras, radar, accelerometers, temperature sensors, and rain sensors. As a result, vehicles like Ford Fusion Energi generate about 25GB of data per hour, although this could go up to 250GB for vehicles that they are experimenting with. All this information currently exists in isolation.
By implementing Big Data analytics on a global scale, this huge amount of data, with the permission of vehicle owners, will be transferred into cloud data centers where it can be analyzed and used to make vehicles better, according to Ford executives. Ford's entire Big Data analytics initiative has yielded innovations like EcoBoost engines, and hybrid and plug-in hybrid technologies. The EcoBoost engine is already a success and it won the "International Engine of the Year" award for 2012 and 2013. Ford produced the 2 millionth EcoBoost engine in September this year.
Why invest
This essentially means that Ford is making the right moves as far as innovation is concerned. The development of the EcoBoost engine is an important landmark as it has helped the company make more efficient vehicles. Given such moves that Ford has been able to make on the back of its analytics, it won't be a big surprise if we see the company churn out more such ground-breaking innovations in the future. Driven by the EcoBoost engine and the EcoSport model, Ford has been able to make good headway in the Asian markets such as India and China.
Analysts are expecting Ford's earnings to grow at a CAGR of 11% and the way Ford has been fortifying its business around the world, it won't be surprising if Ford surpasses these estimates. So, let's take a look at Ford's plans for all segments one by one.
At a P/E ratio of 12 and a dividend yield of 2.40%, Ford is pretty cheap and it is constantly looking to make itself better. In addition, the earnings growth expectation for the next five years is almost 15% per year, but it won't be surprising if analysts revise their targets upwards as the company penetrates more into emerging markets. Thus, Ford is making good use of Big Data and the company might also be able to increase its earnings as a result in the future.
Conclusion
Ford has been seeing good sales growth across the world and has been launching new products to bolster its position further. It has been investing in innovation and they are bearing fruit. Also, as mentioned above, Ford is pretty cheap at the moment and if the company continues to make impressive innovations such as the EcoBoost engine by assimilating data and using it well, it can continue to earn higher profits.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.
from SeekingAlpha.com: Home Page http://seekingalpha.com/article/1868121-why-ford-is-still-a-good-buy?source=feed
Aucun commentaire:
Enregistrer un commentaire