Ford Motor Company (F) Continues Its Dominance

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Ford Motor Company (NYSE:F) continues its dominance in the current year too. As the auto sector has been witnessing growth following the financial crisis period, there was a sense of belief that the auto sector might have seen its peak. However, the results of the company and the sector do not suggest anything to the effect. In fact, the monthly sales number suggests that the peak is yet to reach. Also, the company’s sales were better than the rival and the biggest automaker in the United States, General Motors Company (NYSE:GM). More than that, the company gained market share and outsold the leader in March. That was something that it managed to do it probably for the first time in the recent past.

Favorably Placed In China

The economy in China might be struggling or facing uncertainty. However, Ford Motor Company (NYSE:F) is experiencing a growth in the region. Conditions might have been different for other automakers, which might have either a similar situation or struggling to post growth. However, the American firm did well to boost its sales by 5% in March to 114,788 vehicles. The big driver of the growth was Sports Utility Vehicles (SUV) deliveries. The company sold as much as 26,732 SUVs last month representing 29% YOY growth. However, there were also some hiccups witnessed in the auto segment.

For instance, Great Wall Motor, which is the largest SUV maker in China, experienced slower SUV sales thus hurting its stock price. That, in turn, affected its billionaire chairman, Wei Jianjun, fortune. Also, it was not a one-month performance of Ford Motor Company (NYSE:F) that is suggesting a strong show. For the first quarter also, the company witnessed 14% growth in its sales to 314,454 vehicles. China is a crucial market for any automobile manufacturer since it represented the biggest market in the world. Therefore, continued strong performance in the region is crucial for overall performance for the American firm. Any weakness in any other weak segment could be offset if the market like China remained strong.

Big Chunk Of Sales Is Fleet

One of the factors that are helping Ford Motor Company (NYSE:F) to report impressive sale numbers is the fleet sales as the government, as well as, the commercial, which were a great business. The month of March witnessed 37% total sales coming from the fleet sales only. While the rental sales accounted for approximately 17% of the total sales in March, government and commercial fleet sales represented 6% and 14% respectively in the same period. The company improved its fleet sales from the year-ago month’s 29%. In every segment, it saw growth. The daily rental and commercial accounted for 12% each of total sales in March 2015 whereas the government fleet sales represented only 5% in last year period.

Though one month is not enough to gauge Ford Motor Company (NYSE:F)’s or any other automakers’ performance, it was quite clear that the company has been making strong inroads. Its quarterly performance was also considered as good. The fleet sales remained strong in the first quarter with 36% of the total sales coming from it. Predictably, daily rental represented 17% of the total sales while 13% accounted for commercial and 6% represented the government. The biggest question is whether it can continue to post growth in the same manner in the coming months too. The management was cautious about it and expressed the view that it might not see the same kind of growth in the second half of the current year.

Excellent 1Q For Luxury Lineup

Ford Motor Company (NYSE:F) might have struggled with its luxury line up in the last one decade. However, it has reported something extraordinary numbers for the first quarter. One of the factors that are contributing to its continued dominance is the gains witnessed in SUVs that reported 28% gain in sales in March over the preceding year period. That clearly compensated the 11% drop in its car sales for an overall growth of 11%. In the last one and half decades, it was the best performance as far March month was concerned.

Ford Motor Company (NYSE:F)’s Lincoln has been recording its solid performance throughout the first quarter with its utilities recording 27% more vehicles in the first quarter. As a result, the overall brand’s sales grew 16% in the first quarter. It was not only the vehicle sales number, but the company was also mindful in ensuring better average transaction prices or average selling prices. In the first quarter, the company could see more than $2,100 in average transaction prices. That was nearly four times of the growth rate of the complete luxury division. The recent reports could suggest that the company could easily surpass the analysts’ expectations in the first quarter.

Car Sales To Remain A Concern

Despite Ford Motor Company (NYSE:F) recording strong sales in trucks and SUVs, there are some concerns. For instance, car sales were not as strong as other segments with the unit growth recording only 1.4% for the YTD period. Its fleet sales appear to be above the normal level. However, its official clarified that its fleet sales jump was due to some big deliveries timing. Its sales chief, Mark LaNeve, indicated that the full year rental fleet would remain around 11% of its total sales in the United States in the current year.

Ford Motor Company (NYSE:F) appears to be focusing more on higher margins by focusing on trucks and SUVs as they fetch increased average selling price for strong profit margins. For the current year, the company has offered conservative operating margin in North America with either 9.5% or slightly above. However, with the increased ASPs, there is an expectation that operating margin will be better than the guided range. That would mean getting additional cash flow to possibly boost dividend rate.

Conclusion

Ford Motor Company (NYSE:F) shares are better placed in terms PE and price to sales ratio for the trailing twelve-month period. Its revenue growth is significantly higher than the industry. Similarly, its return on equity is higher. Its ASP should help it to achieve better net income growth. In any case, the company is continuing its dominance and the stock is a better bet than its rival.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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