Ford Motor Co Phillips Ngo Thai Pham Carol Linh Cha Xiaohan Jia Hsiao Hsuen Brian 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 Directors 57 Executive Vice President and President, North America James J. Padilla 69 Vice Chairman of the Board Allan D. Gilmour 60 President and Chief Operating Nicholas V. Scheele 46 Chairman, CEO William Ford, Jr. Age Position Name
Officers Income N/A $ 1.54M James Padilla, 57 Exec. VP and Pres, North America N/A N/A Don Leclair, 52 CFO, Group VP N/A N/A Allan Gilmour, 69 Vice Chairman N/A $ 2.22M Nicholas Scheele, 60 Pres, COO, Director N/A $ 219.00K William Ford, Jr., 46 Chairman, CEO Exercised Pay
TOP INSIDE HOLDER 12-Mar-04 562,896 REICHARDT, CARL E. 19-Mar-04 698,027 GILMOUR, ALLAN D. 31-Mar-04 1,994,659 FORD, EDSEL B. II 31-Dec-02 2,729,019 FORD, WILLIAM C. JR. 31-Mar-04 2,744,011 FORD, WILLIAM CLAY Reported Shares Holder
Breakdown of Major Holders 10 Number of Institutions Holding Shares: 38% % of Float Held by Institutional & Mutual Fund Owners: 37% % of Shares Held by Institutional & Mutual Fund Owners: 1% % of Shares Held by All Insider and 5% Owners:
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 FORD Automotive comparison Out of 378,909 cars sold TOYOTA MOTOR Market CAP
Worldwide Vehicle Unit Sales (in thousands) 2/3 From North America ¼ Europe 1/10 Others
Internal Sales 2003 units sold Ford cars sale a great amount more than the rest of the automotive brands.
Company Share and Trading Information 17.34 52 Week High 6.58 52 Week Low 25.07 Bil Market Cap. 1.831 Bil # Shares Out. 0.40 Dividend/Share 15.78 April 23, 2004
Financial Ratios <ul><li> </li></ul>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 ) 0.87 -1.90 -29.96 Dividends (5-Year Annual Avg.) -12.55 -17.00 NA EPS (5-Year Annual Avg.) 4.64 1.83 1.76 Sales (5-Year Annual Avg.) 1,128.40 -17.80 NA EPS (Qtr vs year ago qtr) 22.80 34.50 3,350.00 EPS (YTD vs YTD) 5.40 25.60 10.60 Sales (Qtr vs year ago qtr) S&P 500 Industry Company Growth Rates %
Price Ratios The current P/E ratio for Ford is higher than the industry but much lower than the S&P average. ( FAIR ). This is probably because Ford has 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 19.20 4.70 1.60 Price/Cash Flow Ratio 3.57 2.29 3.22 Price/Book Value 1.71 0.43 0.16 Price/Sales Ratio 25.6 9.4 NA P/E Ratio 5-Year Low 64.8 87.5 NA P/E Ratio 5-Year High 41.0 19.2 28.8 Current P/E Ratio S&P 500 Industry Company Price Ratios
Profit Margins % 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 5.0 1.8 0.7 5Yr Net Profit Margin (5-Year Avg.) 8.6 3.1 2.7 5Yr PreTax Margin (5-Year Avg.) 47.3 28.2 27.6 5Yr Gross Margin (5-Year Avg.) 4.3 2.0 0.5 Net Profit Margin 7.7 3.2 1.5 Pre-Tax Margin 47.0 29.1 29.5 Gross Margin S&P 500 Industry Company Profit Margins %
Financial Condition Ford’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 ) . 10.23 14.18 4.47 Book Value/Share 6.1 8.1 37.9 Leverage Ratio 2.5 2.2 1.3 Interest Coverage 1.1 1.3 1.5 Quick Ratio 1.5 1.8 2.0 Current Ratio 1.00 3.21 22.01 Debt/Equity Ratio S&P 500 Industry Company Financial Condition
Investment Returns 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. 5.4 2.4 1.8 Return On Capital (5-Year Avg.) 1.8 1.2 0.8 Return On Assets (5-Year Avg.) 10.9 8.4 13.7 Return On Equity (5-Year Avg.) 4.4 2.6 0.4 Return On Capital 1.5 1.3 0.2 Return On Assets 8.9 10.9 9.3 Return On Equity S&P 500 Industry Company Investment Returns %
Management Efficiency 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) . 0.3 0.7 0.6 Asset Turnover 7.9 8.7 13.2 Inventory Turnover 5.4 1.9 1.5 Receivable Turnover 288,000 464,000 469,000 Revenue/Employee 12,000 9,000 2,000 Income/Employee S&P 500 Industry Company Management Efficiency
Holding Period Return Paid 40 cent dividend for each year for past 3 year Negative HPR in 2002 due to net loss Price drop at beginning of 2004 -0.3830 0.7634 -0.2213 HPR 15.72 9.3 16 12.06 Price 1.05 0.4 0.4 0.4 Dividend 0.1201 Earnings growth rate estimate (12/04) -0.3830 0.7634 -0.2213 . HPR = ( Ending Price – Beginning Price +Distributions)/ Beginning Price 1.Background Analysis: 2001 2002 2003 2004 (12/31)
Free Cash Flow and Cost of Equity Negative income in 2002 and 2001 caused negative FCFE and Ke. Ford’s stock is currently underpriced as of 2/26/04 Because DCF Model 0.7509 > CAPM Model 0.02543 DCF Model CAPM Model 11,483 -1,846 14,085 15,777 FCFE 2001 2002 2003 2004 -1.225281375 -7.797401637 0.693377925 0.750875193 Ke(required return on equity) -0.1058516 -0.22522002 0.3763893 0.02542534 K(required return on equity)
Market Efficiency Analysis Company Specific News Appoint Stephen G. Butler to Board of Directors Decided 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 Analysis Non-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 02 Even with much fluctuation, and struggling, Ford’s stock price is at their mid-range .
Risk Analysis Beta = COV (RIBM, RS&P500) / VAR (RS&P500) Experts had calculated a 1.33 beta for year 2004 0.956 1.0682 1.1422 1.1598 2001 2002 2003 2004 0.41602743 0.071920558 0.052083934 Unlevered Beta
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 0 Kd 0.033849 0.049395 0.060585 Ke 0.13 0.11 0.09 Wp Wd We 0.041 0.049 0.029 WACC 0.034387432 0.04547612 0.04265 0 0.00058 0 0.96 0.95 0.97
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: 2003 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
Conclusion Conclusion Ford Motor Company: Analyst Ratings Zacks average brokerage recommendation is Moderate Sell .
SELL STOCK <ul><li>HPR of Ford is negative for 2004 </li></ul><ul><li>High amount of debt, high production cost, net losses for 2002 and 2001 </li></ul><ul><li>low interest coverage </li></ul><ul><li>We as a group rate for as a SELL </li></ul>
BUY STOCK <ul><li>Efficient market hypothesis, we might take another stand point on Ford. </li></ul><ul><li>We feel Ford has a lot of room to improve on in the near future. </li></ul><ul><li>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. </li></ul><ul><li>Therefore, assuming EMH, we look at Ford as a BUY . </li></ul>