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On Mar 18, we maintained our Neutral recommendation on Ford Motor Co. based on its better performance in the fourth quarter of 2012, despite its higher structural costs and the economic weakness around the world, particularly in Europe.

Why Maintained?

On Jan 29, Ford posted a robust 55.0% increase in earnings per share to 31 cents in the fourth quarter of 2012 from 20 cents in the same quarter of 2011 (all excluding special items). With this, the company beat the Zacks Consensus Estimate of 26 cents.

Total revenue grew 5.5% to $36.5 billion on a 7.5% rise in wholesale volumes to 1.5 million units. It was also higher than the Zacks Consensus Estimate of $33.2 billion.

Following the release of the fourth quarter results, the Zacks Consensus Estimate for 2013 declined 2.7% to $1.44 per share. Meanwhile, the Zacks Consensus Estimate for fiscal 2014 declined 5.4% to $1.76 per share. Ford currently retains a Zacks Rank #3 (Hold).

Ford is expanding its foothold in the emerging global markets including Argentina, Brazil, China, India and Thailand. Ford expects that 70% of its global expansion will be in Asia, primarily China and India. Ford anticipates that these investments will eventually bear fruit with a 50% improvement in sales to 8 million vehicles in 2015. Small car sales, as a percentage of total sales, are expected to go up to 55% by 2020 from the current level of 48%.

Ford continues to focus on hybrid vehicles. Ford plans to invest $135 million for its next-generation hybrid-electric vehicles. The company has launched all-new C-MAX, C-MAX Energi plug-in hybrid, new Fusion Hybrid and Fusion Energi plug-in hybrid fuel-efficient electric vehicles in 2012. It expects hybrid sales to improve owing to the new launches and plans to triple production capacity of electrified vehicles by 2013.

However, Ford’s commodity and structural costs will increase affecting the company’s results. Ford has been replacing its older vehicles with new models to provide customers with smart technology, outstanding safety, excellent fuel efficiency and high quality standards with greater comfort.

Other Stocks to Consider

Few stocks that are performing well in the industry where Ford operates include STRATTEC Security Corporation , Gentherm Incorporated and China Zenix Auto International Limited . Strattec Security and Gentherm are Zacks Rank #1 (Strong Buy) stocks while China Zenix Auto carries a Zacks Rank #2 (Buy).

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