With its momentum rising, it seems clear that Ford has found its best self again.
It was nice of my colleague Dan Mayfield to point out the best end-of-summer automobiles deals in the market.
With the most recent government statistics showing that overall automobile and parts dealers’ sales climbed 0.7% after a 1.3% move in July, manufacturers and dealers should be jumping for joy.
Indeed, The Chicago Tribune reported that Ward’s Automotive Group showed sales of light trucks and cars came in at annualized rate of 17.7 million vehicles, the industry’s best since July 2005.
The big question then, is how to find the “best” deal in the automotive sector without shelling out $35K for that BMW 3-Series that Mr. Mayfield has me salivating over.
The answer is right here in our own domestic backyard: Ford (F).
Its F-Series recorded a monthly best since 2006, with over 70,000 units moved off dealer lots. Of those sales, 63% of were for higher margin F-150’s with EcoBoost engines.
The good news was even better for its SUV brands: the new Edge saw a 36% jump while the age-old reliable Explorer jumped 22% year over year.
Meanwhile, Mustang sales were up 70%, the best monthly showing since 2007. Lincoln sales rose 6%, the best performance since 2008.
Those sales figures and stronger margins are bound to show up on Ford’s next earnings go around, a nice follow up to its second-quarter results.
Q2 results included operating after-tax earnings per share of 47 cents per share, compared to 7 cents per share on a year-over-year basis (and nearly 10 cents per share higher than estimates).
At the same time, operating cash flows soared to $1.9 billion, compared to a loss of $.7 billion over the same period.
Once again, the power of SUVs and trucks led the way.
Ford management is on board with that momentum, as they reaffirmed estimated pre-tax profit for 2015 between $8.5-$9.5 billion, up from $6.3 billion in 2014.
Put it all together and Ford stock should be a screaming buy on momentum alone.
What you won’t see at first glance from Ford, however, is its stock getting much love from investors so far this year, and in fact over the last full year. Year-to-date, F stock is down over 5%, and it’s off over 11% in the last year.
However, Ford’s revenues and earnings are gradually-yet-markedly improving, and investors should sit up and take notice.
Combine expected revenue growth with expanding margins on a good portion of those revenues, and you have a company with a forward price/earnings ratio of 7.60 and price/sales of .40, according to Yahoo Finance.
Those are not the fundamentals of a company with forward sales momentum, continued product innovations and margin gains. Indeed, Ford stock feels like a bargain at its current price of under $15 per share.
For those who can wait for that share price revival, Ford’s 15 cents per share dividend (and 4% dividend yield) looks nice every quarter. Since reinstituting its dividend, Ford has increased it every year since 2012.
Ford’s payout ratio of just under 60% leaves more room for annual increases, and with operating cash flow of over $15 billion, investors can wait for the stock to come into line with expected financial results.
Competition is fierce from virtually every shore on the planet…
The dollar’s strength is hurting anyone selling in Europe…
World economies continue to struggle…
… and every automaker is just one recall away from disaster.
Regardless, it’s good to see the quintessential stalwart American automobile-maker getting back its swagger.
You may not drive one its cars out of the showroom, but buying Ford stock is just as good a deal.
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This post originally appeared in mainstreetinvestor.com.
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