Topic: Daily Advice

Ford passes GM on the road to recovery

Ford: Image of C-MAX European Hybrid Cars

Just a few years ago, the North American automobile industry was in a deep slump and some long-established names appeared to be on the verge of failing. But while General Motors is still struggling to regain profitability, its biggest Detroit rival has engineered a strong turnaround and is making expansion plans.

FORD MOTOR CO. (New York symbol F; www.ford.com) is the second-biggest carmaker in the U.S., and the world’s fifth-largest.

The company continues to benefit from its restructuring plan, which it implemented in 2005 to deal with its falling sales and market share. In the years since, Ford has sold its Jaguar and Land Rover luxury car divisions, closed factories and laid off workers.

In 2011, the company sold 5.7 million vehicles, up 7.2% from 5.3 million in 2010. Sales rose 11.3% in North America, 7.5% in Asia, 3.5% in South America and 1.8% in Europe. Ford now accounts for 16.5% of all car sales in the U.S., up from 16.4% in 2010. It also has 8.3% of the European market, down from 8.4% in 2010.

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Stock market investment: Ford resumes paying dividends

Revenue rose 12.7% in 2011, to $136.3 billion from $120.9 billion in 2010. Earnings jumped 208.1%, to $20.2 billion, or $4.94 a share. However, that’s mainly due to an $11.5-billion tax benefit. The company earned $6.6 billion, or $1.66 a share, in 2010.

Ford plans to invest some of its rising profits in the 15 new models that it plans to introduce over the next few years.

The company will probably earn $1.48 a share in 2012. The stock trades at 8.1 times that forecast. Ford also recently resumed paying dividends. The annual rate of $0.20 a share yields 1.7%.

In the latest edition of Wall Street Stock Forecaster, we look at the potential rewards—and risks—of Ford’s international expansion plans, including a deal with Russia’s second-largest carmaker. We conclude with our clear buy-hold-sell advice on the stock.

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