When Ford (NYSE:F) CEO Alan Mulally departs the company in July, he’ll be leaving behind a very different company than the one he was introduced to in 2006. That’s a good thing, too, and it can be largely contributed to the sweeping changes that Mulally implanted once he took the helm.
A slew of new products, further implementation of Mulally’s One Ford plan, and a quickening pulse of automotive sales imply that Ford is on the up and up, and will do well moving forward.
However, even after a strong sales year in 2013 and commendable performance so far this year, Ford’s stock has remained rangebound, reaching a 52-week high of $18.02 and a low of $13.98. Whether a breakout is on the horizon naturally remains to be seen, but here are some supporting factors that suggest Ford is positioned to do quite well over the next couple of years.
1. Europe is on the mend
Europe has represented one of the greatest risks to Ford’s bottom line since the recession, and although the atmosphere has made steady improvement, Ford’s operations in the area have yet to reach the break even point. But that’s slated come next year, after cost-cutting measures, new products, and a revitalization of Europe’s collective economy have helped right the ship.
“Europe was very encouraging, because it did have headwinds in Turkey and Russia, and sort of the broad issues around the world,” CFO Bob Shanks said after Ford’s quarterly report release. “But it still reduced its losses by more than half, and we had growth in share, growth in revenue, and growth in volume, so very encouraging results there.” By this time next year, Europe should be back on top and contributing meaningful growth to Ford’s bottom line.
Ford revealed on Wednesday that Europe sales rose 6.6 percent in April to 99,700 vehicles, with the compact Fiesta paving the way, with nearly 30,000 new registrations. Ford’s growth is well above the 4.2 percent growth seen by the market at large and lends encouragement that Europe will return to profitability on time.
2. Demand is sky high
Upon the release of the company’s latest quarterly report, Ford’s stock dropped as investors sold on headlines that profit had slipped due to onetime expenditures related to weather and warranty reserves. Had they looked deeper, though, they would have found that overall, Ford’s sales figures and other core numbers were healthy.
“It was a solid quarter, and the thing we were trying to convey today is that you put aside for the moment the things that we highlighted around the warranty reserves, the weather, the balance sheet [foreign] exchange effects — you know, we had a very strong run rate of the business,” Shanks said at the time. “North America has an operating margin of 7.3 with everything, and when you take out the warranty reserves — which isn’t something that happens day in and day out — we were up at about 10 percent, which is a really fantastic run rate.”
Ford saw wholesale deliveries grow by 6 percent, and revenue improved about 1 percent in the first quarter over a year ago, numbers made more impressive considering the tough comparable that automakers are facing after 2013′s blowout sales year.
3. Ford is poised for growth
This year marks one of the busiest in Ford’s long history, as it is coordinating 23 new product launches worldwide; 16 alone in North America. However, given that the models are being revealed this year and launching in the 2015 model year, it’s setting the company up to benefit next year, once the products are on the market and the demand from those holding out to upgrade their ride is released.
Leading this growth will undoubtably be the new F-150, pictured above. It boasts a new aluminum body, which is expected to shave up to 700 pounds off the weight of the truck. The F-Series is continuously the best-selling vehicle in the U.S. by a wide margin; further, given that pickups offer some of the most comfortable margins of any mass-produced vehicle, sales of the new F-Series will be among the most significant factors in Ford’s future growth.
Joining the pickup with be the new Mustang, which for the first time is seeing action in markets in Europe and in Asia; a new Focus compact sedan and hatchback; and a new Ford Edge SUV, among other vehicles. There’s little else a company can do to spur sales and growth than overhaul its entire portfolio, which is what Ford is doing. Further, Ford is launching its Lincoln brand in China this summer, where it is expected to do very well and grapple with incumbent brands Buick and Cadillac for a slice of the enormous Chinese car market.