ford motor co
TRANSCRIPT
Ford Motor CoPhillips NgoThai Pham
Carol Linh ChaXiaohan JiaHsiao HsuenBrian Tyson
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.
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
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
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
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
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
TrucksCars
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%
Industry Comparison
31%
13%
12%11%
7%
7%
5%
14%
Toyota MotorNissanDaimlerChryslerHonda General MotorsFord MotorVolkswagenOthers
FORD
Automotive comparison
Out of 378,909 cars sold
TOYOTA MOTOR
Market CAP
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
Worldwide Vehicle Unit Sales (in thousands)
4402
2003
568
4292
2161
555
4933
1882
609
4787
1960
473
0500
100015002000250030003500400045005000
2002 2001 2000 1999
North America
Europe
OtherInternational
2/3 From North America ¼ Europe 1/10 Others
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.
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 0.40April 23, 2004 15.78
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 1,128.40Sales (5-Year Annual Avg.) 1.76 1.83 4.64EPS (5-Year Annual Avg.) NA -17.00 -12.55Dividends (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)
Price Ratios
Price Ratios Company Industry S&P 500Current P/E Ratio 28.8 19.2 41.0P/E Ratio 5-Year High NA 87.5 64.8P/E Ratio 5-Year Low NA 9.4 25.6Price/Sales Ratio 0.16 0.43 1.71Price/Book Value 3.22 2.29 3.57Price/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
Profit Margins %
Profit Margins % Company Industry S&P
500Gross Margin 29.5 29.1 47.0Pre-Tax Margin 1.5 3.2 7.7Net Profit Margin 0.5 2.0 4.35Yr Gross Margin (5-Year
Avg.) 27.6 28.2 47.35Yr PreTax Margin (5-
Year Avg.) 2.7 3.1 8.65Yr Net Profit Margin (5-
Year Avg.) 0.7 1.8 5.0Although 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
Financial Condition Financial
Condition Company Industry S&P 500Debt/Equity Ratio 22.01 3.21 1.00Current Ratio 2.0 1.8 1.5Quick Ratio 1.5 1.3 1.1
Interest Coverage 1.3 2.2 2.5Leverage 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).
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 5.4Ford’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.
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).
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 1.05Price 12.06 16 9.3 15.72HPR -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
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
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
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
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.
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
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
2003 2002 2001Interest LTD Interest LTD Interest LTD
0.053 608 0.068 432 0.123 3020.009 688 0.068 119 0.076 134670.007 13832 0.076 13607 0.044 464030.065 5155 0.07 150 0.058 1059380.021 58274 0.043 41529 0.088 10930.043 99921 0.048 1056820.094 843 0.094 843
0.033849 0.049395 0.055878Kd (2003) Kd (2002) Kd (2001)
Kd has been decreasing due to lower interest rates.
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.
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
ConclusionFord Motor Company:
Analyst Ratings
Zacks average brokerage recommendation is Moderate Sell.
Conclusion
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
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.
THE END