Ford Motor Company (NYSE:F) appears to be pretty confident about its next pick up. The company announced a share buyback worth around $1.8 billion after the market closed on Tuesday. According to Sterne Agee analyst Michael Ward the move betrays confidence in the new F-150, which is due to go on sale this Fall.
On this morning’s market shares in the Dearborn, Michigan based company shot up by more than 2.5% on the back of the share repurchase announcement. Ford Motor Company (NYSE:F) management said the explicit reason for the repurchase was to combat stock dilution caused by the exercise of convertible bonds, and stock options given to employees as compensation.
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Ford F-150 looks strong
The buyback is discretionary and, according to the Sterne Agee analyst if no-one else, speaks to the expected strength of the 2015 Ford F-150. The pick up truck is the traditional best seller in the United States, and it’s formed the backbone of Ford business for decades. Each new model is a change to miss expectations and lose the lead. The car that will arrive in the Autumn is no exception.
The new Ford F-150 is something of an anachronism for a stock market that is more and more concerned with the future of the auto industry. Much of the spotlight in the last year has been put on Tesla Motors Inc (NASDAQ:TSLA), which is developing fully electric solutions, and fuel cell makers, which are also working on tech that could hit sales of cars like the F-150 hard.
Ford Motor Company (NYSE:F) is going to make big changes with the 2015 F-150 in order to refresh the line, and drive interest in the vehicle. According to reports the truck will feature a fully aluminium body along with a brand new V6 engine. The vehicle is set to be much lighter because of the use of aluminium. That should make it more fuel efficient and endear it to those looking to make cost reductions at the pump.
Ford buyback boosts confidence
It’s not clear that the new F-150, and expected demand for the pick-up, has directly caused Ford Motor Company (NYSE:F) to use cash for a buyback. Michael Ward, over at Sterne Agee, seems to think so, however. The analyst reckons the company is a Buy, and has a twelve month price target of $20 on Ford shares. On this morning’s market shares began selling for $15.54.
In an April 30 report on the company’s first quarter earnings report, Ward wrote that “longer term, an improved balance sheet, earnings acceleration in 2015, and yield support, along with the likelihood of more favorable capital allocation for shareholders over the next few years” were all big positives for the company going forward, and he upped his price target on the firm as a result.
Ford Motor Company (NYSE:F) is a growing concern, and the company’s management appears to be confident in its prospects, given the buyback announced on Wednesday afternoon. With that in mind the company’s stock is definitely worth looking at for those interested in the industry. Its valuation is certainly more attractive than that of Tesla Motors Inc (NASDAQ:TSLA)