ford motor co

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Ford Motor Co Phillips Ngo Thai Pham Carol Linh Cha Xiaohan Jia Hsiao Hsuen Brian Tyson

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Page 1: Ford Motor Co

Ford Motor CoPhillips NgoThai Pham

Carol Linh ChaXiaohan JiaHsiao HsuenBrian Tyson

Page 2: Ford Motor Co

Company History June 16, 1903

Henry Ford and 11 business associates with $28,000 in cash, gave birth to what was to become one of the world's largest corporations.

1913

1908

Model T was born

Today

Ford Motor Company's single greatest contribution to automotive

manufacturing was the moving assembly line.

Page 3: Ford Motor Co

Board of DirectorsName PositionPosition AgeAge

William Ford, Jr.

Chairman, CEO 46

Nicholas V. Scheele

President and Chief Operating

60

Allan D. Gilmour

Vice Chairman of the

Board 69

James J. Padilla

Executive Vice President and President, North

America

57

Page 4: Ford Motor Co

Officers Income  Pay Exercised

William Ford, Jr., 46Chairman, CEO

$ 219.00K N/A

Nicholas Scheele, 60Pres, COO, Director

$ 2.22M N/A

Allan Gilmour, 69Vice Chairman

N/A N/A

Don Leclair, 52CFO, Group VP

N/A N/A

James Padilla, 57Exec. VP and Pres, North America

$ 1.54M N/A

Page 5: Ford Motor Co

TOP INSIDE HOLDER

Holder Shares Reported

FORD, WILLIAM CLAY 2,744,011 31-Mar-04

FORD, WILLIAM C. JR. 2,729,019 31-Dec-02

FORD, EDSEL B. II 1,994,659 31-Mar-04

GILMOUR, ALLAN D. 698,027 19-Mar-04

REICHARDT, CARL E. 562,896 12-Mar-04

Page 6: Ford Motor Co

Breakdown of Major Holders

% of Shares Held by All Insider and 5% Owners:

1%

% of Shares Held by Institutional & Mutual Fund Owners:

37%

% of Float Held by Institutional & Mutual Fund Owners:

38%

Number of Institutions Holding Shares:

10

Page 7: Ford Motor Co

40.9

59.1

40.1

59.9

37.7

62.3

36.6

63.4

0.00

20.00

40.00

60.00

80.00

100.00

1999 2000 2001 2002

Trucks

Cars

Sales distribution

Ford’s Statistics showed that the percentages of trucks sold have been increasing every year since 1999, up until 2002 compared to cars, this is probably because of the popularity of the F-150, the Expedition, and the Explorer . Cars sales had decreased from 1999’s 40.9% to 2002’s 36.6%

Page 8: Ford Motor Co

Industry Comparison

31%

13%

12%

11%

7%

7%

5%

14%

Toyota Motor

Nissan

DaimlerChrysler

Honda

General Motors

Ford Motor

Volkswagen

Others

FORD

Automotive comparison

Out of 378,909 cars sold

TOYOTA MOTOR

Market CAP

Page 9: Ford Motor Co

Market Revenue (in billions)

185,524.00169,794.91

164,196.00150,948.33

106,766.31

74,771.23

0.00

50,000.00

100,000.00

150,000.00

200,000.00

Sales

General MotorsDaimlerChryslerFord Motor Toyota Motor VolkswagenHonda Motor

Page 10: Ford Motor Co

Worldwide Vehicle Unit Sales (in thousands)

4402

2003

568

4292

2161

555

4933

1882

609

4787

1960

473

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2002 2001 2000 1999

North America

Europe

OtherInternational

2/3 From North America ¼ Europe 1/10 Others

Page 11: Ford Motor Co

Internal Sales

210,279

11,888

15,689

4,037

10,615

3,025

0 50000 100000 150000 200000 250000

Ford

Lincoln

Mercury

Jaguar

Volvo

Land Rover

Individualcompanies

2003 units sold

Ford cars sale a great amount more than the rest of the automotive brands.

Page 12: Ford Motor Co

Company Share and Trading Information

52 Week High  17.3452 Week Low  6.58

Market Cap.  25.07 Bil# Shares Out.  1.831 Bil

Dividend/Share  0.40

April 23, 2004  15.78

Page 13: Ford Motor Co

Financial RatiosGrowth Rates %  Company  Industry  S&P 500Sales (Qtr vs year ago qtr) 10.60 25.60 5.40

EPS (YTD vs YTD) 3,350.00 34.50 22.80

EPS (Qtr vs year ago qtr) NA -17.80 1,128.40

Sales (5-Year Annual Avg.) 1.76 1.83 4.64

EPS (5-Year Annual Avg.) NA -17.00 -12.55

Dividends (5-Year Annual Avg.) -29.96 -1.90 0.87

•  

Ford Motor Co. has much lower sales (QTR vs year ago qtr) than the industry (WEAK). This is probably because the revenue growth of competitors such as DaimlerChrysler AG and General Motors Corp were much higher than Ford’s. The 5-year annual average on sales is close to the industries average but well below the S&P 500 average. (WEAK)

Page 14: Ford Motor Co

Price Ratios

Price Ratios  Company  Industry  S&P 500

Current P/E Ratio 28.8 19.2 41.0

P/E Ratio 5-Year High NA 87.5 64.8

P/E Ratio 5-Year Low NA 9.4 25.6

Price/Sales Ratio 0.16 0.43 1.71

Price/Book Value 3.22 2.29 3.57

Price/Cash Flow Ratio 1.60 4.70 19.20The current P/E ratio for Ford is higher than the industry but much lower than the S&P average. (FAIR). This is probably because Fordhas a much lower earnings per share than Toyota and GM. The price/book value of Ford is relatively close to the industry and the S&P 500. FAIR

Page 15: Ford Motor Co

Profit Margins %

Profit Margins %  Company  Industry S&P

500

Gross Margin 29.5 29.1 47.0

Pre-Tax Margin 1.5 3.2 7.7

Net Profit Margin 0.5 2.0 4.3

5Yr Gross Margin (5-Year Avg.) 27.6 28.2 47.3

5Yr PreTax Margin (5-Year Avg.) 2.7 3.1 8.6

5Yr Net Profit Margin (5-Year Avg.) 0.7 1.8 5.0

Although Ford’s gross margin is similar to the industry’s gross margin, it is considerably lower than the S&P 500. FAIR. This shows Ford’s inefficiency in costs in relation to the revenue the company brings in. Also, the net profit margin is below both the industries and S&P 500 again displaying Ford’s high costs, its overall profit margin percentages are weak. WEAK

Page 16: Ford Motor Co

Financial Condition  Financial

Condition  Company  Industry  S&P 500

Debt/Equity Ratio 22.01 3.21 1.00

Current Ratio 2.0 1.8 1.5

Quick Ratio 1.5 1.3 1.1

Interest Coverage 1.3 2.2 2.5

Leverage Ratio 37.9 8.1 6.1

Book Value/Share 4.47 14.18 10.23Ford’s debt/equity ratio and leverage ratio are both extremely high compared to the industry and the S&P 500, attracting risk neutral (or less risk-adverse) investor. But even with very high debt Ford still has a lower interest coverage than the S&P 500 and the industry. Meaning that Ford is weaker at paying the interest on the debt even though it has a huge debt (WEAK). The current ratio of Ford is slightly higher than the industry and the S&P 500 meaning Ford is a little more liquid (WEAK).

Page 17: Ford Motor Co

Investment Returns

Investment Returns %  Company  Industry S&P

500

Return On Equity 9.3 10.9 8.9

Return On Assets 0.2 1.3 1.5

Return On Capital 0.4 2.6 4.4

Return On Equity (5-Year Avg.) 13.7 8.4 10.9

Return On Assets (5-Year Avg.) 0.8 1.2 1.8

Return On Capital (5-Year Avg.) 1.8 2.4 5.4

Ford’s return on equity is very similar to the industry and S&P 500. (FAIR). Also, the return on capital is lower than Industry and S&P 500. It shows that it’s resell of capital assets and securities are low (POOR). Ford also has a lower return on assets than both the industry and the S&P 500, it displays poor use its current assets. Ford probably has too much inventory or warehouses that are

not as efficient as the other companies.

Page 18: Ford Motor Co

Management Efficiency

Management Efficiency  Company  Industry

 S&P 500

Income/Employee 2,000 9,000 12,000

Revenue/Employee 469,000 464,000 288,000

Receivable Turnover 1.5 1.9 5.4

Inventory Turnover 13.2 8.7 7.9

Asset Turnover 0.6 0.7 0.3

Ford’s Net Income/Employee is significantly lower that Industry and S&P 500. But its Revenue/Employee ratio is higher than Industry and S&P 500. It illustrates that Ford has higher revenue, but little net income, because the company incurs high production cost. (POOR).

Page 19: Ford Motor Co

Holding Period Return2004 (12/31) 2003 2002 2001

1.Background Analysis:

. HPR = (Ending Price – Beginning Price +Distributions)/ Beginning Price -0.2213 0.7634 -0.3830

Earnings growth rate estimate

(12/04) 0.1201

Dividend 0.4 0.4 0.4 1.05

Price 12.06 16 9.3 15.72

HPR -0.2213 0.7634 -0.3830  

Paid 40 cent dividend for each year for past 3 yearNegative HPR in 2002 due to net lossPrice drop at beginning of 2004

Page 20: Ford Motor Co

Free Cash Flow and Cost of Equity

FCFE 15,777 14,085 -1,846 11,483

2004 2003 2002 2001

Ke(required return on equity) 0.750875193 0.693377925 -7.797401637 -1.225281375

Negative income in 2002 and 2001 caused negative FCFE and Ke. Ford’s stock is currently underpriced as of 2/26/04Because DCF Model 0.7509> CAPM Model 0.02543

K(required return on equity) 0.02542534 0.3763893 -0.22522002 -0.1058516

DCF Model

CAPM Model

Page 21: Ford Motor Co

Market Efficiency AnalysisCompany Specific News

Appoint Stephen G. Butler to Board of DirectorsDecided it’s good news.Before the announcement date price increased, but decrease after.So, No form, because it doesn’t reflect any form of Market efficiency

Page 22: Ford Motor Co

Market Efficiency AnalysisNon-Company Specific News

OPEC announces that it will cut oil production by 1 million barrels a day. Decided this is bad news. Ford’s stock price declined briefly before and after the announcement date.If we only look at a 3 day period, the chart showed a weak form of market efficiency

Page 23: Ford Motor Co

Five-Year Stock Analysis

The chart shows Ford’s 5 year stock behavior. Decline starting in Jan 01 due to declined sales in domestic auto market. Pension shortfall in July 02Even with much fluctuation, and struggling, Ford’s stock price is at their mid-range.

Page 24: Ford Motor Co

Risk Analysis

2004 2003 2002 2001

1.1598 1.1422 1.0682 0.956

Unlevered Beta 0.052083934 0.071920558 0.41602743

Beta= COV(RIBM, RS&P500)/VAR(RS&P500)

Experts had calculated a 1.33 beta for year 2004

Page 25: Ford Motor Co

Cost of Capital and Optimal Capital Structure

.WACC=We*Ke + Wd*kd*(1-T)+ Wp* Kp

2003 2002 2001

Using High Beta and High Debt to estimate Ke

Kp 0 11.8 0Kd 0.033849 0.049395 0.060585 Ke 0.13 0.11 0.09WpWdWe 0.041 0.049 0.029

WACC 0.034387432 0.04547612 0.04265

0 0.00058 00.96 0.95 0.97

Page 26: Ford Motor Co

2003 2002 2001

Interest LTD Interest LTD Interest LTD

0.053 608 0.068 432 0.123 302

0.009 688 0.068 119 0.076 13467

0.007 13832 0.076 13607 0.044 46403

0.065 5155 0.07 150 0.058 105938

0.021 58274 0.043 41529 0.088 1093

0.043 99921 0.048 105682

0.094 843 0.094 843

0.033849 0.049395 0.055878

Kd (2003) Kd (2002) Kd (2001)

Kd has been decreasing due to lower interest rates.

Page 27: Ford Motor Co

Optimal Capital Structure

Model III capital structure consists agency cost, bankruptcy cost and financial distress cost.Unrealistic way to calculate because it need 10 years of data.

Page 28: Ford Motor Co

Fiscal year: 2003Captial Structure of Ford

4%

96%

1

2

Past 3 year, debt is above 95% each year.The reason Ford can maintain it’s financial standing is because it has lower Kd each year

Page 29: Ford Motor Co

ConclusionFord Motor Company:

Analyst Ratings

Zacks average brokerage recommendation is Moderate Sell.

Conclusion

Page 30: Ford Motor Co

SELL STOCK

• HPR of Ford is negative for 2004

• High amount of debt, high production cost, net losses for 2002 and 2001

• low interest coverage

• We as a group rate for as a SELL

Page 31: Ford Motor Co

BUY STOCK• Efficient market hypothesis, we might take

another stand point on Ford. • We feel Ford has a lot of room to improve on

in the near future. • So, we are confident that Ford will work out

the inefficiencies. By improving on some of the obvious flaws in the company, Ford’s stock price has plenty of potential to rise.

• Therefore, assuming EMH, we look at Ford as a BUY.

Page 32: Ford Motor Co
Page 33: Ford Motor Co

THE END