Finally the stock market has taken notice of the improvements CEO Alan Mulally and team have made at Ford Motor Company (NYSE:F), sending the stock from its 52-week low of $8.82 a share up to $15 recently. It was welcome news for investors like me who have long known the company’s turnaround and growing potential. Ford’s first-quarter-earnings report noted that North America brought in 11% margins with great sales figures. The good news continues with Fords recent announcement of its plans to expand plant capacity.
By the numbers
This is great news because the increase of 200,000 vehicles will come from the Chicago, Flat Rock, and Kansas City assembly plants. Those plants happen to produce three of Ford Motor Company (NYSE:F)s most important vehicles: the F-Series, Fusion, and Explorer.
Last month the F-Series posted a strong month with over 59,000 trucks sold – up 19% for the year. Ford considers anything above 50,000 a phenomenal month, and the numbers keep rising. Ford has been running a third shift in some plants, which will help secure strong margins in North America for the second quarter.
The Fusion, which is taking market share from Toyota Motor Corporation (ADR) (NYSE:TM)‘s Camry, had been running plants at 114% capacity to try and match demand. Ford Motor Company (NYSE:F)’s had troubles keeping enough Fusions on dealer lots, and some consumers have been put on a long waiting list. The extra capacity will no doubt be aimed to match production with the Fusion’s demand, and could help boost its sales in the second quarter.
Super segment
Ford considers the retail segments of subcompact, compact, midsize sedan, and small utility segment to combine for the “super segment”. Led by the Fusion, Ford Motor Company (NYSE:F) has reported its market share in this super segment has increased 28%. That’s a significant increase when compared to the 9% gain by the overall industry.
“Ford’s share has grown this year faster than all other automakers. The driving force behind this is our phenomenal rate of growth in the super segment and our continued success with these key vehicles in the long-dominated Japanese regions of the country,” said Erich Merkle, Ford Motor Company (NYSE:F) U.S. sales analyst. “Once our additional manufacturing capacity on Fusion comes on line, the battle for sales leadership in the midsize segment will tighten considerably.”
Bottom line
For investors, the additional capacity is good news for a couple of reasons. Firstly, it confirms that Ford’s second quarter is likely to be just as strong in profits and margins as the first quarter. April was already a record month in sales for both the Fusion and Escape – while the F-Series had its best April since 2006. Secondly, it confirms that even if the overall market begins to slow, Ford’s vehicles are still in high demand and will continue to sell well. Ford wouldn’t bring on extra capacity unless it was extremely confident demand would remain strong over the next year.
In a couple weeks we’ll know how May sales shaped up, and it will give us a better idea what to expect for the full quarter. One thing is clear: Expect a lot of sales, a lot of profits, and at a tremendous margin to boot.
The article Ford Stock: Great News for Investors originally appeared on Fool.com and is written by Daniel Miller.
Motley Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford.
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