Ford Motor Company (F), General Motors Company (GM): This Auto Stock Is Dynamite

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Ford Motor Company (NYSE:F) No matter how high the bar is set, Ford Motor Company (NYSE:F) always manages to remain well above it. It keeps blowing away analyst projections. Needless to say, the second largest US automaker has beaten both earnings and revenue expectations by miles in its second quarter. It has achieved a growth that’s both impressive and broad-based with each geographic region improving its performance. And this includes Europe.

Second quarter numbers

Ford Motor Company (NYSE:F) earned $0.45 per share on revenue of $38.1 billion. It beat earnings estimates by $0.08 per share and revenue estimates by an imposing $2.95 billion. The pre-tax profits of $2.6 billion were higher by $726 million, while revenue was up by 15% over last year.

Some big positives for the company were a 16% increase in wholesale volumes to 1.67 million vehicles, improvement in automotive margin to 6.4% from 4.9% a year-ago, and automotive cash flow generation of $3.3 billion. Let us look at the key takeaways for investors.

Global growth

Ford Motor Company (NYSE:F) has always derived most of its sales and profits from North America, more so since Europe went into recession. But, now it is slowly developing big markets away from home. As its investments in Asia and other emerging markets start bearing fruit, it stands to see explosive growth.

Superior execution, lean cost structure, and the underlying strength of its ‘One Ford Motor Company (NYSE:F) strategy are the key positives that will enable Ford Motor Company (NYSE:F) to maximize its gains in each of its markets. A reflection of this was already visible in the second quarter results. Ford Motor Company (NYSE:F) achieved a break-even in all its international markets combined together, compared to a $600 million loss in the first quarter.

Market trends

North America shone as usual with revenue of $22.4 billion, pre-tax profits of $2.3 billion, and operating margin of 10.4%. This is the fifth time in the last six quarters that Ford has earned over $2 billion in pre-tax profits and had operating margin in excess of 10%.

North America will continue to remain strong with US Automotive SAAR at 15.7 million units in July and Ford increasing market share by 0.9% year-over-year to 16.5% in the first half. The F-series pickup sales are exploding, driven by booming truck demand, and the Fusion sedan is breaking all records.

At the other end of the world, the Asia Pacific Africa segment has swung to a pre-tax profit of $177 million during the second quarter and is expected to remain profitable through the year. The company was earlier hoping to just break-even by year-end.

And all this is happening in China with Ford increasing its market share to 4.3% from 2.8% in the year-ago period. Focus witnessed a 69% increase in sales during the first half and Ford launched five new or refreshed models in the country. It is on track to launch three more – Fiesta, Mondeo, and Transit SUV – in the second half.

In South America, the company has improved its market share to 9.6% from 9.4% a year ago. Wholesale volume and revenue increased by 24% and 28% respectively, while pre-tax profits increased to $151 million from $5 million in second quarter of 2012. Despite the uncertain currency situation, it is encouraging that the new Ranger pickup and refreshed Fiesta have received a good response while EcoSport and Fusion remain segment leaders.

Europe nearing turnaround

There is finally some good news from Europe with Ford narrowing losses in the second quarter and positively revising its 2013 guidance. Pre-tax losses came in at $348 million compared to $404 million in the year-ago quarter and $462 million in the first quarter. The company expects to lose $1.8 billion in Europe vis-a-vis its earlier expectation of a $2 billion loss.

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