A Look at Ford’s Renewed Focus, and 4 Other Automakers

Posted:10/17/12
By:Chris Lau

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A Look at Ford’s Renewed Focus, and 4 Other Automakers

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Ford Motor Company (F) is worth another look. Shares were recently upgraded by an analyst with a $17 target price. Shares traded around $10.40 recently, implying upside of 70%, if the target is reached. On average, 12 analysts have an average target price of $13.77 on Ford shares. This great American company was the only company that did not ask for government assistance during the financial melt-down. Led by CEO Alan Mulally, a former CEO of Boeing, Ford reduced the number of types of vehicles, reduced the cost to manufacture, and renegotiated labor costs with its union.

In the third quarter, Ford spent $1.73 million to lobby federal officials on EV (electric vehicle) tax credits, and sought support for ethanol and natural gas vehicles. Ford wants favorable tax credits for natural gas-powered automobiles, and also wants to see EV tax credits to be extended.

When an EV Ford Focus sedan is available, it will qualify for a $7,500 tax credit.

Investors interested in auto companies building electric vehicles should add Ford to their watch list. These cars are already being made by Toyota Motors (TM), a Japanese company. Incidentally, Toyota is hurting from the fallout from the squabble between China and Japan. Both Honda Motors (HMC) and Toyota shares are down substantially in recent trading sessions:

Weak sales in China, along with major recalls by Toyota and Honda, may benefit both Ford and General Motors (GM). Both companies are performing well in a 3-month period:

Ford announced a recall, too, but it is far more minor than that of Toyota and Honda. The company is recalling more than 150,000 Fiesta vehicles, to adjust a side-impact airbag system.

Question to Investors:

Is it time to be bullish on Ford? To properly evaluate this question, investors should look at Ford, its competitors, and have an idea on the general direction of the global economy. Ford is also exposed to China and Europe. A slowdown in those geographies would impact Ford.

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U.S. automobile manufacturers are favorable over foreign makers. They include:

1. Ford Motor Co. (F, Earnings, Analysts, Financials): Develops, manufactures, distributes, and services vehicles and parts worldwide. Market cap at $39.28B, most recent closing price at $10.30.

2. General Motors Company (GM, Earnings, Analysts, Financials): Operates as a global automaker. Market cap at $38.82B, most recent closing price at $24.79.

A pure-play electric vehicle manufacturer is Tesla. Shares peaked in July 2012 at $35.96 and steadily declined since.

3. Tesla Motors, Inc. (TSLA, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells electric vehicles and advanced electric vehicle powertrain components. Market cap at $3.16B, most recent closing price at $28.06.

Japanese automobile manufacturers include:

4. Toyota Motor Corporation (TM, Earnings, Analysts, Financials): Engages in the design, manufacture, assembly, and sale of passenger cars, minivans, and commercial vehicles. Market cap at $133.3B, most recent closing price at $77.32.

5. Honda Motor Co., Ltd. (HMC, Earnings, Analysts, Financials): Engages in the development, manufacture, and distribution of motorcycles, automobiles, and power products primarily in North America, Europe, and Asia. Market cap at $56.93B, most recent closing price at $31.43.

Written by Chris Lau. Disclosure: Author has a long position on Ford shares.

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