Ford Motor Company (F), General Motors Company (GM): Three Reasons to Go Long With This Automaker

Ford Motor Company (NYSE:F) During the financial crisis of 2008, Auto giant Ford Motor Company (NYSE:F) bent but didn’t break. While Chrysler and General Motors Company (NYSE:GM) took a $35 billion bailout from the U.S. government, Ford Motor Company (NYSE:F) opted to restructure and make a comeback on its own. Now, not only has Ford Motor Company (NYSE:F) regained its footing, it’s charging full speed ahead.

Here are three reasons why I think Ford Motor Company (NYSE:F) is a buy.

1. Earnings

At a time when investors are hesitant to believe in car companies, Ford Motor Company (NYSE:F)’s second quarter earnings blew expectations away. The firm posted EPS of $0.45, far above analysts’ predictions of $0.37. Ford Motor Company (NYSE:F)’s revenue increased by 14% to around $38 billion, which helped Ford haul in $2.6 billion in pre-tax profits. Even after taxes, Ford pulled down net income of $1.2 billion, up 5.2% from last year.

Competitor General Motors Company (NYSE:GM) also posted net income of $1.2 billion, but that is a decrease of 20% from $1.5 billion last year. Apparently Ford’s “One Ford” plan is working. It seems that all of the talk about restructuring and profitability actually turned into a solid plan. Already, Ford is seeing promising sales in key areas.

2. Golden State sales

California is a particularly important state for auto makers: one out of every ten new cars sold in the U.S. is sold in California. Traditionally, Toyota Motor Corporation (ADR) (NYSE:TM) and Honda have dominated the West Coast, but the second quarter saw Ford making some gains in market share.

The new Ford Fusion is the top seller out West and around the country as sales of the vehicle are up 18% for the first half of 2013. Specifically, Ford sales in Northern California have grown 35% this year. Overall U.S. sales also increased by 13.4%, beating industry growth of 8.4%.

Toyota Motor Corporation (ADR) (NYSE:TM) still owns the lion’s share of the market with 19.2%, but the Japanese firm’s share declined from 25% since 2008. Meanwhile, Ford continues to catch up and now holds a 9.5% share compared to 6.5% in 2008.

Toyota Motor Corporation (ADR) (NYSE:TM) executive Bill Fay said that he isn’t concerned about Ford’s efforts, mainly because he says Ford is spending too much money on incentives to get customers to buy. But I think Toyota Motor Corporation (ADR) (NYSE:TM) has plenty to be concerned about. Consumers are finally realizing that Ford makes solid cars, and just maybe they don’t have to turn to imports anymore. Consumers are picking up on Ford’s shift to cars and crossovers and away from foreign trucks and SUV’s.

3. Sales across the Pond

Unfortunately for auto makers, Europe’s economy is in the midst of recession. This means that the European auto market is greatly contracting. In fact, the market as a whole contracted 6.7% in the first half of 2013. Ford is by no means immune to the contraction, but June sales offered a glimmer of hope for the company.

In June, Ford saw its vehicle registrations in Europe increase by 6.9% from the year before. Comparatively, General Motors Company (NYSE:GM)’s brands combined for a 7.2% decrease in registrations for June. Ford’s June success can largely be attributed to its presence in the U.K., where the auto industry continues to outperform the rest of Europe.

Both Ford and General Motors Company (NYSE:GM) warned investors earlier this year that they are headed for losses in Europe in 2013, so the rebound in June comes as a pleasant surprise to investors. Even if Ford can’t beat the recession, it can stay afloat and gain market share from companies such as General Motors Company (NYSE:GM) whose troubles seem even more severe.

Bottom line

Ford is back. CEO Alan Mulally’s turnaround plan is paying off, and Ford’s stock will mirror this fact. Currently Ford’s shares are trading around $17.00, but I think they will reach the illusive $20.00 as Ford’s sales and market share increase around the globe. Unlike many firms post-recession, Ford is benefiting from responsible decisions that it made five years ago.

Ford was down too long. It’s comeback time.

The article 3 Reasons to Go Long With This Automaker originally appeared on and is written by Marie Palumbo.

This article was written by Randy Holcombe. Randy has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors (NYSE:GM). The Motley Fool owns shares of Ford. Marie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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