Ford shares up as analyst cites health, products

DETROIT (AP) -- Ford Motor Co. shares jumped Tuesday after an analyst said the market isn't giving the company enough credit for its healthy balance sheet and future growth opportunities.

THE SPARK: Bank of America analyst John Murphy added Ford to the bank's "U.S. 1" list of top investments, replacing auto supplier Magna International Inc.

THE BIG PICTURE: Ford reported a $2.4 billion profit in the second quarter, down slightly from the same quarter a year ago. Ford said its results were hurt by rising commodity costs and a big increase in investments in Asia. Ford wants to boost its sales by 50 percent in that region by mid-decade, and it is spending millions to introduce 15 new cars in India and China.

Even though its earnings slipped, Ford is still far healthier than it was in 2006, when it took out $23 billion in loans to restructure the company. Ford has cut brands and closed factories and reinvested the cash into well-received products like the new Ford Explorer SUV and Ford Fiesta subcompact.

THE ANALYSIS: Murphy said Ford is well positioned to benefit when U.S. auto demand improves. The company had $22 billion in cash and $14 billion in debt at the end of the second quarter, a dramatic change from 2008, when it had $10 billion more debt than cash.

Murphy said Ford should soon see relief from several of the pressures weighing on its stock. The company is putting out new cars more quickly than it used to, which will drive sales. He expects a "reasonable" outcome of ongoing labor talks with the United Auto Workers union and believes Ford could potentially issue a dividend in 2012. The U.S. Treasury also could soon sell its remaining interest in General Motors Co., another factor hurting auto stocks in general.

"Even in the downside scenario of a double-dip recession, Ford's stalwart balance sheet is substantially healthier than in 2008, but we believe that the market is not giving Ford's stock credit for the company's balance sheet health," Murphy wrote.

SHARE ACTION: Ford shares rose 7 percent, or 67 cents, to $10.60 in afternoon trading.

Published: Thu, Aug 11, 2011