Ford (F) Stock is Great Choice for Conservative Investors

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Ford Motor Company (NYSE:F) finds itself in the middle of an uptrend.

The Dearborn, Michigan-based automotive giant topped earnings estimates in its October 26 report. The sales of its F-series trucks, by far its most popular product line, has delivered transaction price growth as other segments have lagged. While the nature of driving is undergoing changes, with the strength of its profitable pickup truck segment and its focus on new initiatives, F stock can still deliver steady returns for conservative investors.

F has engaged in a battle for sales with long-time competitors General Motors Company (NYSE:GM), Fiat Chrysler Automobiles NV (NYSE:FCAU), Toyota Motor Corp (ADR) (NYSE:TM), Honda Motor Co Ltd (ADR) (NYSE:HMC) and others. However, as the only American automaker not to receive a federal bailout during the last financial crisis, the company has increased sales most years since 2009.

Ford Has Upside Surprise

The latest earnings report left holders of F stock smiling. The company reported earnings for the third quarter of 2017 of 43 cents per share. This beat estimates of 33 cents per share. It also represented a huge increase from the 26 cents per share reported in the same quarter last year. Ford now expects earnings for 2017 to come in between $1.75 and $1.85 per share, up from the previous estimate of $1.74 per share.

Ford also avoided an expected drop in revenue. The automaker revealed a quarterly revenue figure of $36.45 billion, up from $35.94 billion in the third quarter of last year.

F Stock Can Answer Competition

To be sure, F faces many new competitive threats. Pessimism regarding Ford’s ability to survive has risen. Some say the rise of Uber Technologies Inc. and Lyft will drive many not to own a car. Others such as our own Vince Martin cite an overall decline in demand for cars. However, Ford sells about 60% as many vehicles in the U.S. as it sold in 2000, so this trend has been going on for some time. Also, growing international sales have made up for this shortfall.

Moreover, Ford also maintains a strong niche in trucks and sport utility vehicles. Despite its relatively late adoption of an electric or driverless strategy, Ford has a plan to match its competitors in these areas. While the results of these efforts remain to be seen, F is unlikely to follow its historic rivals Packard Motor Car Company or Studebaker Corporation off a cliff.

More likely, the worst-case scenario places Ford as a buyout target, mainly for its F-Series product line. This would be comparable to when the company then known as Chrysler Corporation purchased American Motors Corporation, and by extension, the Jeep product line.

However, the disappearance of F stock seems unlikely for now. Ford enjoyed a revenue increase in the previous quarter, driven by the company’s international markets. In North America, quarterly revenue fell by $900 million from year-ago levels. This is Ford’s home market and its largest market as North America claimed $20.9 billion of the company’s revenue. However, truck sales rose 14%, and the company increased its SUV sales by 4%.

The F stock price rose 2% on the news, only to give back most of those gains the next day. Though F remained just over $12 per share recently, it represents an increase from the $10.56 low in mid-August. Unlike its new competitor, Tesla Inc (NASDAQ:TSLA), F shows little movement, remaining largely in the $10-$13 per share range for the last 12 months.

F Stock Dividends Give Incentive

However, what F doesn’t have in stock growth, it makes up for in stability. Unlike Tesla, Ford has reported mostly profitable quarters over the last few years. Moreover, investors collect a 60-cent-per-share annual dividend, representing a return of about 5%. Ford introduced dividends in 2012 as it recovered from the financial crisis of the last decade. F investors witnessed annual increases until 2015, and the dividend remains at 60 cents per share today.

With its profitable pickup trucks and its entrance into driverless and electric vehicles, F stock can be a valuable addition to a conservative portfolio. New competitors such as Tesla, Alphabet, and even Blackberry pose a competitive threat. However, F is working with partners to build a competitive edge in these areas.

Additionally, the company maintains its strength on product lines such as trucks and SUVs. Moreover, a 5% dividend delivers substantial returns for stockholders even if the stock’s period of stagnation continues. Investors wanting a steady, profitable source of cash flow should buy Ford stock and set it to cruise control.

 

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.

 


Article printed from InvestorPlace Media, https://investorplace.com/2017/10/f-stock-great-choice-conservative-investors/.

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