Strong Truck Sales Hint at Strong Profits for Ford Motor Company

By John Rosevear Markets Fool.com

Ford Motor Company (NYSE: F) said that its U.S. sales rose 0.3% in December, a small gain, but enough to cap the company's best year for U.S. sales since 2007.

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Ford's sales: The raw numbers

Metric Total Sold in December 2016 Change (YOY)
Total sales 239,854 0.3%
Retail sales 183,454 5%
Ford-brand total sales 227,063 (0.6)%
Ford car sales 46,495 (14.4)%
Ford SUV sales 68,685 4.6%
Ford trucks (total) 111,883 3.2%
F-Series pickups 87,512 2.7%
Lincoln-brand total sales 12,791 17.8%
Lincoln car sales 4,710 28.1%
Lincoln SUV sales 8,081 12.5%

What's working for Ford in the U.S. right now

What's working for Ford right now? Trucks, trucks, and trucks, with a very healthy side of SUVs.

Ford sold a whopping 87,512 F-Series pickups in December, up 3% from a year ago, and its best single-month result in 11 years. Ford's new-for-2017 Super Duty models have found a strong reception in their first few months on the market, with early buyers willing to pay up for loaded models. Ford's U.S. sales chief, Mark LaNeve, said that the average transaction price on the new Super Duty in December was $55,100, up about $5,400 from a year ago -- a very profitable situation for the Blue Oval.

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Big prices for Ford's big trucks: Theaverage Super Duty pickup buyer paid over $55,000 last month. Image source: Ford Motor Company.

After some up-and-down months, Ford's SUV sales were also strong in December. As a group, Ford-brand SUV sales rose 4.6% from a good year-ago result, with big gains for the midsize Edge (up 23.7%) and the hefty truck-based Expedition (up 29.7%) pacing the group.

The revival of the Lincoln luxury brand continued to make progress, as well. Lincoln sales were up 17.8% on the month, thanks to a continued strong result for the midsize MKX crossover SUV (up 19.2%), and good demand for the new Lincoln Continental sedan (1,845 sold). For the full year, Lincoln sales were up 10.4%, a good result in what has been a sluggish market for luxury vehicles.

Ford's car models continue to struggle

Ford's car models continue to lose ground as more buyers choose trucks and car-based crossover SUVs instead of traditional sedans. As a group. Ford-brand cars were down 14.4% from a year ago, with the top-selling Fusion down just over 25%. Ford noted during a conference call for analysts and media that it has reduced its inventories of sedan models significantly from a year ago: That helped it maintain good pricing despite the lower sales levels.

Thinner inventories helped support strong pricing

Ford's overall inventories hadn't quite reached danger levels, but they were up in the fall: The Blue Oval had an 83-day supply of vehicles available as of the end of November, a bit higher than investors would like. That fell to a more comforting 70 days' worth by the end of December, Ford sales analyst Erich Merkle said on Wednesday.

Generally, automakers prefer to have an average supply of around 60 days for car and SUV models and 80 days' to 90 days' worth of trucks. Ford was squarely in that range as of the end of 2016.

Reducing inventory appears to have helped Ford support good pricing last month. TrueCar estimates that Ford spent an average of $4,190 per vehicle on incentives last month, down slightly from November, and less than the average spending at key pickup rivals General Motors ($4,611) and Fiat Chrysler Automobiles ($4,291).

LaNeve said that Ford's average transaction prices (net of incentives) were up $1,600 last month from a year ago versus an industry-wide increase of about $530. It's a good cap to what appears to have been a solidly profitable fourth quarter for Ford.

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John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors and TrueCar. The Motley Fool has a disclosure policy.