Were You Surprised By The FORD News?

| November 3, 2009 | 0 Comments

Every once in a while, the market surprises people.  It doesn’t happen very often, but when it does… the results are jaw dropping.  Yesterday was a day like that.  The big news was all about Ford (F).

The company reported quarterly earnings.  To say they SHOCKED the Street would be an understatement.  However, one person wasn’t surprised by the news… but more on that later.

What did Ford do?

They surprised everyone by announcing third quarter earnings of $1 billion.

Then they went on to say they’d be solidly profitable in 2011.

I dug a bit deeper into their numbers and I liked what I saw.  Ford’s been cutting costs and capturing more market share… 2.2% more to be exact. And the “Cash for Clunkers” program helped overall sales.  They’re raising prices (mainly by removing incentives), and material costs are lower.

Ford made just under $1.0 billion… about $0.26 per share.  Not bad considering analysts were expecting a 12 cent loss.  Talk about an upside surprise!

Even Ford’s cash position is improving.  The CFO indicated they took in more than $1.3 billion in cash this quarter… better than the $1.0 billion cash outflow last quarter.

This is a huge about-face from last year.  In 2008, it wasn’t looking good for the company.  They had lost $14 billion.

That’s all changing now.

Ford’s managed to avoid both a government bailout and bankruptcy court.  And now it looks like they are on the right track for significantly improved business results.

Clearly the turnaround for Ford happened more quickly than anyone expected.

Everyone seems to be surprised, but I’m not.

On March 20th, I published an article all about Ford… “Are You Crazy To Buy Ford’s Stock Right Now?”

I noted a bunch of things helping improve the company’s performance.

First, they were restructuring debt.  Trading debt for stock is always a great way to cut costs.  Second, the unions had agreed to a wage and benefit freeze.  And third, I noted they were poised to benefit as other car companies entered bankruptcy.

I said bankruptcy would hurt the sales of the other automotive companies and help Ford sales… and it did.

I told people to buy Ford when it was trading at $2.50 a share.  Just look how it’s performed.

The stock soared to a new 52-week high of nearly $9.00 a share in August.  Now it’s trading between $7.00 and $8.00.  Since I recommended it, this little lottery ticket’s returned over 180% in just a few months.

So does this mean we should rush right out and load up on the stock?  Not so fast.  The easy money’s already been made.  Now, the company needs to execute in a tougher environment.  No more Cash for Clunkers.  No more debt exchanges.  No more help from the unions.

Yep.  You heard that right.

Union workers recently rejected a new work agreement.  The fear of Ford folding is gone.  Now it’s back to business as usual with the unions.

It’s not a good sign.

It just goes to show you how difficult the car industry is.  If you were fortunate enough to record a big winner with Ford, now’s the time to take your money off the table.  While the stock should head higher over the next few years if they avoid a union strike, I just don’t see it climbing more than a few points.

There are many other better places to put your hard earned money.  As a long term investment, Ford is not the stock you want to hold.

Tags: , , , , ,

Category: Stocks

About the Author ()

The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

Leave a Reply

Your email address will not be published. Required fields are marked *