The Recovery Everyone Can See Coming: Ford Motor Company (F), Toyota Motor Corporation (ADR) (TM), Honda Motor Co Ltd (ADR)(HMC)

Page 1 of 2

I don’t know how much more data investors really need. I wrote about this last year, and the signs have only become clearer since then. The auto industry is undergoing a recovery that should last for several years. The pent up demand is huge, and the Great Recession cause many to rethink purchasing a new vehicle. However, just like death and taxes, some things are inevitable, and old cars don’t run forever. One company poised to benefit from this upcoming recovery is Ford Motor Company (NYSE:F).

Ford Motor Company (NYSE:F)How Many Tips Do You Need?
When I wrote my last post, Experian reported there were 245 million vehicles in the U.S. with an average age of 11 years. In addition, 52 million of these vehicles were 16 years or older.

Investors can also look at the railroad industry to get a tip on the direction of auto sales. In their last earnings report, CSX saw a 15% increase in auto shipments. Norfolk Southern also said auto shipments were up, and Union Pacific saw a rise of 14% in automotive volumes.

In addition, you have analysts’ projections for growth at each of the major automotive manufacturers. Analysts expect both Toyota Motor Corporation (ADR) (NYSE:TM) and Honda Motor Co Ltd (ADR) (NYSE:HMC) to show big earnings growth as they reclaim lost market share. Specifically, Toyota is expected to grow earnings by over 40%, and Honda Motor Co Ltd (ADR)(NYSE:HMC)

Honda Motor Co Ltd (ADR)(NYSE:HMC) is expected to see near 30% growth. Ford Motor Company(NYSE:F) and General Motors Company (NYSE:GM) have been gaining ground on their foreign competitors, so they aren’t expected to see such explosive growth. However, with 12.5% growth expected from GM, and 10.5% growth at Ford, they won’t do too badly either.

The Strength Of The OvalCompany
If you look at Ford’s recent quarterly earnings, you can see that in three of their four geographic regions they performed very well. In North America and South America the company saw 12.76% and 10.71% revenue growth respectively. In Asia Pacific and Africa, the company’s 47.37% revenue growth was astounding. It’s no surprise the problem region was Europe, showing revenue down 21.69%.

Ford did mention something interesting, that I think bodes well for the future of the company in Europe. They said that last year, Europe only sold 13.5 million vehicles, which was the lowest since 1995. When a geography has a 17 year low in units sold, you can assume if they aren’t at the bottom of their cycle, they have to be pretty close. Automotive sales are cyclical in nature, so investors have to realize that buying when things are bleak is often the best way to profit.

There Is Always Room For Improvement
In addition, Ford has some opportunities to improve their performance even further. The company’s automotive operating margin of 3.8% compares favorably to most of their competition. This margin was good enough to beat out Toyota’s margin of 1.91% and Honda’s margin of 2.94%. However, General Motors Company (NYSE:GM) did better at 4.27%, and Ford had a wild variation in margin between different geographies.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!