3 Things Ford Motor Company Investors Might Have Overlooked During Its March Sales Decline
As you can see in the graph below, U.S. new-vehicle sales have consistently strengthened in the years since the recession and are nearing prerecession levels. That's led to many analysts and folks in the media guessing when U.S. sales will inevitably peak, or worse, stumble lower.
Chart by author. Data source: Automotive News DataCenter.
Leading up to today's automotive industry sales day, it appeared that investors were in store for a rare monthly decline in sales -- in fact, have been only six months since 2009in which the U.S. auto industry has posted year-over-year sales declines.
Now with March officially in the books and all major automakers having reported data, the industry managed to post a meager 0.5% gain in new-car sales last month, and the speculation of when sales will peak and ultimately stall is officially kicked down the road. With that aside, here are three factors to consider regarding Ford Motor Company's sales decline in March.
How March differs It's very important to examine automotive sales data in context, since the industry is affected by seasonal changes, selling days, number of weekends, and industry trends, among other factors. For instance, this March was nearly doomed from the get-go, at least in terms of year-over-year comparisons. In 2014, severe winter weather crippled dealer traffic and sales through February, making March a very strong rebound month -- and making year-over-year comparisons for March 2015 very tough.
Furthermore, dealership traffic and sales spike on weekends, and last year's March had some calendar luck with five weekends, compared to only four last month. Ultimately, despite this March facing tough comparisons, the Seasonally Adjusted Annual Rate (SAAR) last month rose to 17.1 million units, which is much stronger than last year's 16.4 million units in March.
Switching gears and looking specifically at Ford's numbers, there's more behind the company's decline than simply a difficult monthly comparison.
Retail sales tell the tale Ford's total unit sales in March(including Lincoln) declined 3.4% to 235,929, which was a little better than the 5.4% decline analysts expected. Expanding our view slightly, Ford managed to increase its sales in the first quarter, compared to last year, by 2% to 594,663, despite its best-selling F-150 truck not being produced at a full clip until late in the second quarter.
Looking beyond overall sales figures, investors should take note that while Ford's total sales were down, a lot of that was because of a decline in fleet sales, as the company has noted it will continue to prioritize supply for retail consumers.
In fact, Ford's fleet sales were down 13% in March, compared to last year's month, and represented only 29% of total sales compared to 32% last year. That in turn led to a 1% gain in retail sales; retail sales are those from dealerships to consumers, rather than Ford's sales to dealerships, and are often more indicative of the industry's health/demand. While a 1% gain in retail might not sound like a big deal, consider that it was enough to check in as Ford's best retail sales month in nine years. Expect fleet sales to move higher late in the second quarter as the company increases its production enough to satisfy retail demand, and can then begin supplying fleet demand.
Digging deeper, let's take a look at some of the bright spots in individual model sales.
Ford's 2015 Mustang. Source: Ford Motor Company.
New models are selling, fast Let's start with Ford's most important vehicle model, America's best-selling full-size truck: the F-Series. While saleswere down 4.6% in March compared to last year, that speaks to the tight supply because Ford won't reach full 2015 F-150 production capacity for another couple of months and dealerships would purchase more 2015 F-150s if they could. The vehicles that make it to the dealership are being sold quickly, and retail sales of the F-Series were up 10% last month.
Not only that, but 29% of all F-150s sold in Marchwere the new 2015 model, a percentage that is expected to reach the low 40%s at the end of April. Those new models, which typically garner a higher price tag, have helped boost the F-150's average transaction price by $2,100, and that should move higher as the mix of newer models being sold continues to increase; thus investors can expect revenue generated to also increase.
Another model seeing a great start to 2015 is the redesigned Mustang. Ford's iconic muscle car has generated one-fourth of all sports car sales through the first two months of 2015, and sales were up 36% last month, for the vehicle's best March performance since 2007. Sales have increased 52% from 19,596 to 29,811 in the first quarter, compared to last year.
While I remain very bullish on Ford through the remainder of 2015 and beyond, everything wasn't all peachy last month. Investors should keep a close eye on Ford's passenger car sales going forward. Ford car sales were down 10.6% last month as its two best sellers, the Fusion and Focus, posted respective declines of 12% and 14.5%.
Ultimately, despite Ford's overall sales decline of 3.4%, and the overall industry only squeaking out a minor 0.5% gain in March,it was a tough year-over-year comparison for all involved. Ford continues to have a rich sales mix with less focus on fleet sales, and its new models are selling very well -- and that will only continue as production of the all-new F-150 hits full speed late in the second quarter.
The article 3 Things Ford Motor Company Investors Might Have Overlooked During Its March Sales Decline originally appeared on Fool.com.
Daniel Miller owns shares of Ford. The Motley Fool recommends and owns 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.
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