Here's Why European Demand Makes Shares of Ford Motor a Smart Buy

Automaker Ford Motor (F) is increasingly bullish on Europe, even in the wake of the Brexit.

Ford Motor's third-quarter earnings results confirmed a turnaround in Europe, even as North America reported another quarter of lower pre-tax profits.

In Europe, Ford Motor posted $138 million in pre-tax profits, the sixth profitable quarter in a row. Ford Motor remains Europe's best-selling commercial-vehicle brand, and European demand makes the automaker's stock a compelling long-term growth investment.

Europe accounted for about $6.3 billion of Ford Motor's sales, one-third the amount generated in North America but twice that of Asia-Pacific, during the quarter. Ford Motor has driven profits in Europe via a solid balance sheet, improved cost performance and a strong product mix.

The European continent is a major market for Ford Motor. The company had to endure several years of billion-dollar losses before Alan Mulally, the former chief executive set in motion a solid restructuring plan.

This included closing three manufacturing plants since 2013 including one in Belgium and arriving at a cost-saving agreement with labor unions in Germany.

Cost efficiency and manufacturing capacity utilization have been bulwarks of this transformation, which is beginning to come to fruition. Through the first three quarters this year, Europe has delivered more than $1 billion in pretax profits for Ford Motor.

Of course, the Brexit could throw a huge wrench into Ford Motor's recovery in Europe.

And with a 2.2% operating margin, Europe could easily double that, and it would still be lower than the operating margin in North America.

With sales from North America floundering, Ford Motor clearly needs Europe to hold steady. North America has been a pain point for Ferrari as well, with third-quarter shipments to the Americas growing just 0.4% from a year earlier.

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