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Ford’s Europe Problem Not a Problem?

On Wednesday, Ford landed on the trader radar after the auto maker traded down to its lowest levels since 2009.

Largely the selling was triggered by an announcement in which Ford said, it is doubling its forecast for European losses to more than $1 billion dollars.

And with overseas nations in the throws of a financial crisis, some investors worry that Europe losses could deteriorate further.

But as concerning as those developments sound, top Sterne Agee auto analyst Michael Ward cautions investors not to get too negative.

He tells us there’s an important metric that’s going largely unnoticed. “European operations historically have not been profitable (at Ford),” he says

And he adds that Europe is a much smaller part of Ford’s business than the Street realizes. What matters is North America and in North America Ford is kicking it.

“In North America this year Ford will make 8 billion,” he adds. “Even if Europe loses $1 billion it’s still a very profitable company going forward.”

And in addition, Ward sees another catalyst “At some point I think they increase returns to shareholders – I think it happens in the next 6-12 months.”

Ward has a buy rating on Ford with a $15 price target. “Strong North America performance and a returning cash to shareholders,” are two good reasons to buy.

* You can find our conversation with Michael Ward about 4 minutes into this video clip.


Posted by CNBC's Lee Brodie

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Trader disclosure: On July 25, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joseph Kinahan is long BAC, SHORT PUTS; Joseph Kinahan is long C; Joseph Kinahan is long GS, SHORT PUTS; Joseph Kinahan is long WFT, SHORT PUTS; Joseph Kinahan is long CSCO, SHORT CALLS; Joseph Kinahan is long FB, SHORT CALLS; Joseph Kinahan is long MSFT, SHORT CALLS; Joseph Kinahan is long F, SHORT CALLS; Joseph Kinahan is short SPY CALL SPREADS; Brian Kelly is long XHB; Brian Kelly is long CAT; Brian Kelly is long GE; Brian Kelly is long GLD; Brian Kelly is long LLY; Brian Kelly is long PEP; Brian Kelly is long QQQ; Brian Kelly is long TLT; Brian Kelly is long TIP; Brian Kelly is long EURO; Brian Kelly is short EUROSTOXX 50; Michael Murphy is long AAPL; Michael Murphy is long SBUX; Michael Murphy is long T; Michael Murphy is long VZ; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long USB; Joe Terranova is long GS; Joe Terranova is long JPM; Joe Terranova is long YHOO; Joe Terranova is long SBUX; Joe Terranova is long NKE; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI

For Darren Chervitz
Darren Chervitz is long AAPL

For Stephen Volkmann
I, Stephen Volkmann, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

For Michael Ward
Sterne, Agee & Leach, Inc. makes a market in the following subject company F
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach, Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company and/or companies in the next three months: F





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