Ford's Growth in Europe Lags, but Profits Should Continue to Flow

By Markets Fool.com

Believe it or not, the Ford Mustang was Germany's best-selling sports car atretail last month. Image source: Ford Motor Company.

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Ford Motor Company said on Friday, May 13 that its sales in Europe rose 4.7% in April as the Old World's new-car market continues to show solid growth.

What Ford said

The Blue Oval said its sales in the 20 markets it traditionally thinks of as "Europe" (mostly western and central European nations) grew 6.3% to 113,400 vehicles last month, while its sales in the 50 markets that comprise all of Europe (including Russia, eastern Europe, and several former Soviet republics) grew 4.7% to 129,600 vehicles.

Commercial vehicle sales continued to be a source of strength: Sales of Ford's commercial vehicles in Europe rose 18.9% in April. Through April, Ford has outsold all of its commercial-vehicle rivals in Europe.

Ford's SUVs also continued to shine as both the Kuga (twin to the Escape) and the Fiesta-based EcoSport racked up strong sales. Ford also said it has almost 2,000 confirmed orders for the all-new Edge that will make its European debut later this year.

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Ford also noted that sales of high-profit premium trim lines and performance models continued to be strong, accounting for 58% of its passenger vehicle sales in Europe in April. (Ford also cheekily noted that the Mustang was the top-selling sports car at retail in Germany last month.)

What it means for Ford

Ford's gains last month trailed the overall European market's 9% increase -- or put another way, Ford gave up a bit of market share in Europe last month.

But on the bright side, the "mix" of sales continued to look very profitable for Ford. Generally speaking, the more options a car has, the more profit it will generate for Ford when it's sold. As I noted above, "high series models" (cars and SUVs with "Titanium"-level trim, performance packages, and so forth) accounted for more than half of Ford's retail sales in Europe last month. And as we've seen elsewhere in the world, Ford's SUVs (generally more profitable than comparable sedans) continued to show strong sales growth.

That all bodes well for Ford's bottom line. Ford posted an impressive $434 million profit in Europe in the first quarter, up from a $42 million loss in the first quarter of 2015. "Mix" was a big contributor to that year-over-year gain, accounting for roughly $300 million of the difference, according to Ford chief financial officer Bob Shanks. (Click here for a more detailed explanation of Ford's year-over-year gain in Europe last quarter.)

The takeaway for Ford shareholders

Yes, Ford's sales growth in Europe lagged the overall market's last month. But the factors that powered the Blue Oval to a strong profit in Europe last quarter continued to be present. As long as that continues, and as long as Ford's growth doesn't slip too far behind rivals', I think Ford's results from the Old World will continue to look good.

The article Ford's Growth in Europe Lags, but Profits Should Continue to Flow originally appeared on Fool.com.

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends 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.