Ford Motor Company: What Sales From 3 Critical Markets Tell Investors

By Markets Fool.com

There's no question that it can be extremely difficult to keep up with all the important information companies release. This is particularly true when you have a large number of businesses in your portfolio to keep abreast of.

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If you're a Ford Motor Company investor, you're in luck today: We've got a rundown for you of some important and often overlooked sales information from three of Ford's most important markets.

Profit machine
When covering Ford's sales, you must start with its profit machine: the U.S. market. At first glance, May's sales figures did not impress, with a 1.3% year-over-year decline compared to the industry's 1.3% gain. Ford's car brand segment, not including Lincoln, rose 1.8% over May 2014, while Ford's utilities and truck segments respectively dropped by 0.8% and 5.1%.

Ford's 2015 F-150. Source: Ford Motor Company.

However, Ford's decline in May was at least less than the anticipated 3.1% dip, and there were both positive and negative takeaways for the automaker's most important and profitable product, the F-Series.

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F-Series sales slid 10% in May to just under 62,000 units, but sales are being hindered by lack of product supply rather than declining consumer demand. Production of the 2015 F-150 should hit full stride over the next couple of months, and sales should rise accordingly.

On the flip side, while sales of the F-Series are down year over year, prices of the 2015 F-150 are surging. The price tag for the 2015 F-150 hit $43,300 on average in May, which was $3,000 higher than in May 2014 and set a record high for the truck.

Premium and luxury package trims for the 2015 F-150 are driving significantly higher average transaction prices this year. In fact, 65% of 2015 F-150 retail sales have been for high-end trim packages, which is far above the truck's historical rate of about one-third.

Furthermore, given lower-than-desired inventory of popular SUVs and trucks, Ford plans to bypass the standard summer shutdown for a majority of its North American assembly plants to boost production of these vehicles by 40,000 units. Ford churns out a vast majority of its total profits from North America, and much of that is generated by SUVs and trucks; the faster Ford's assembly line produces those vehicles, the better.

Switching gears from Ford's current profit machine, let's look at what the automaker hopes will become a second pillar of strength for profits: China.

Growth slows
Last year, Ford delivered double-digit salesgains each month in China. In fact, Ford's 2014 sales in China were up a very healthy 19% over 2013. But that surge in sales has made year-over-year comparisons tougher in 2015.

Ford's 2015 Focus ST. Source: Ford Motor Company.

In May, Ford China sold 91,013 vehicles, a 4% gain from the same month in 2014. Ford also switched its reporting in China from wholesale figures to retail figures last month (comparisons here are adjusted). Retail figures will offer investors a better gauge of end-consumer demand, rather than how many vehicles Ford has sold to dealerships.

Ford's slower growth is a recent trend -- its sales in the first quarter of 2015 were up 9% in China. However, weakness in the second quarter has offset early gains, and Ford's China segment sold only 460,000 vehicles this year from January to May, a meager 1% gain over last year's 456,000.


Chart by author. Information source: Ford monthly sales releases.

Despite recent weakness, the long-term trend is positive for the company, and investors will want to watch how Ford's sales in China trend after the automaker last month opened its sixth assembly plant in the nation, this one in Hangzhou. Regardless of the new assembly plant adding production capacity and the potential of increased sales, if the overall economic slowdown in China has put pressure on new-car sales,the remainder of 2015 could be disappointing for Ford investors.

Highlights in a gloomy market
Ford Europe has long been a thorn in the side for investors, costing the automaker more than $4 billion off its bottom line from the beginning of 2012 to the end of 2014. While those losses are horrendous, Ford's operations in Europe are "only" expected to lose $250 million for 2015.

Looking past the profitability issues in Europe, as hard as that might be for investors, there are some bright spots in other metrics. Ford's total vehicle sales theregrew 1.5% in May and 9.3% through the first five months of the year; its market share was also 20 basis points higher, at 7.8%, than in the first five months of 2014.

Ford's sales mix in the area also continues to improve. Sales in healthier distribution channels, including retail and fleet, accounted for 72% of sales last month. That more profitable sales mix was 3 percentage points, or 300 basis points, higher than Europe's industry average in May.

While trucks and SUVs drive higher sales volumes in the U.S., the situation is different in Europe. Here's a glimpse at the two vehicles driving sales.


Chart by author. Data source: Ford's monthly sales releases. "Euro 20" refers to the registration total of the 20 main European markets.

"New products are driving our sales growth in 2015 and we expect to continue building momentum as the year goes on and we launch even more new models," Roelant de Waard, vice president of marketing, sales, and service for Ford of Europe, said in a press release.

One of those new models is Ford's iconic Mustang. Five thousand customers have already ordered the new version that goes on sale in Europe this summer.

Ultimately, what investors can take away from a glance at sales in Ford's three most important markets through May is that the back half of the year will be extremely important for revenue and profits -- an abnormal pattern for Ford and its shareholders.


Image source: Ford Motor Company investor day presentation.

Ford needs to capitalize on sales of the 2015 F-150 once production reaches full capacity. The Dearborn automaker also must continue launching vehicles in Europe and China to help drive sales higher. If Ford accomplishes those tasks in these three markets, look for profitability to improve throughout the remainder of 2015.

The article Ford Motor Company: What Sales From 3 Critical Markets Tell Investors originally appeared on Fool.com.

Daniel Miller owns shares of Ford. The Motley Fool recommends shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.