Ford: 1 Reason to Be Bullish

Ford's Focus has sold very well globally, helping increase Ford's market share. Photo: Ford

Ford recently announced strong third-quarter results with a pretax profit of $2.6 billion, an increase of $426 million over last year. That marks Ford's 17th consecutive quarter of profitability as the company continues its impressive turnaround from the dark days of our last recession. You can be bullish on Ford's North America margins that consistently come in above 10% or you can be bullish on its top-line growth with wholesale units and revenue up 16% and 12%, respectively. You can be bullish on its narrowed losses in Europe or because its dividend has much upside remaining.

There are plenty of reasons to be bullish on Ford, but here's my favorite: Ford's gaining momentum internationally.

In the not-so-distant future, it's very possible that its profits won't be driven almost completely by North America. That would be beneficial to Ford and its investors in more ways than one. First, it would diversify the company and protect profits if vehicle sales in North America begin to taper off years down the road. Second, international growth represents the fastest way for Ford to juice its top and bottom lines as North America has plenty of competition and is a more mature market.

With that in mind, here are two regions where Ford is making steady progress.

Asia Pacific Africa
This region's results are dominated by China, which is a good thing in this case because Ford is making huge strides in that country. In the third quarter, Asia Pacific Africa posted its fifth consecutive quarterly profit, with an increase of $81 million in pretax profits to $126 million. For the first three quarters of 2013, its pretax results are $425 million higher than the same time period last year.

Again, improvements are being driven by Ford's success in China. Ford's market share has improved to 4.3% and should be able to achieve its 6% market share goal by 2015. To understand the growth Ford plans to have in this region, consider that right now Asia Pacific Africa accounts for about 8% of automotive revenues. That will change drastically by the end of the decade, when Ford predicts the region to account for 40% of revenues. Imagine the impact that will have on Ford's top and bottom lines. There will be much growth in the region, and Ford has its plan in place to capture more than its fair share through new product launches.

South America
Ford's third quarter in South America was really a turning point for the company. It posted pretax profits of $159 million, which was a whopping $150 million better than last year. Ford's EcoSport and Fusion continue to lead their segments and customers have responded very positively to the Ranger and refreshed Fiesta.

Ford's wholesale volume and revenue increased in a big way from last year, both up 22%. Through the first three quarters of 2013, volume, revenue, operating margin, and profit all improved over a year ago.

"Ford's record results in the third quarter show the strength of our One Ford plan around the world," said Alan Mulally, Ford president and CEO, in a press release. "Working together, we remain committed to serving customers in all markets with a full family of vehicles, offering the very best quality, fuel efficiency, safety, smart design and value."

Bottom line
As you can see below, there is a lot of international growth available for Ford.

Graph by author. Information from Ford's third-quarter results.

Ford's profits have been dragged down by losses in Europe, but it expects its losses in 2013 to come in under last year's figure, marking the bottom of Ford's losses. By 2015, simply breaking even will essentially add about $1.7 billion to its bottom line, a quick way to significantly boost profits. China will drive huge revenue gains for Ford in its Asia Pacific Africa region, and South America has turned the corner on profitability. As Ford improves its operations and winds down capital expenditure internationally, it will set the company's profits on a nice upward trajectory throughout the decade -- rewarding patient investors along the way.

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Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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