Pick up those profits
With its big fat profit margins and growing volume The F-Series is the biggest profit maker for the company, and sales data has been nothing but encouraging over the last months. April sales were 24% higher versus the same month in 2012, and year-to-date data is showing a 19.1% increase in comparison to last year.
The F-Series has been America´s bestselling car for 36 consecutive years, and there is no slowdown in sight for this iconic product. The average age of trucks on the road is 13 years, and housing activity is positively correlated with truck sales, so the F-Series will continue benefitting from an improving housing sector over the next months.
has been doing notoriously well in that segment too. The Chevrolet Silverado increased its sales by 28.1% in April and 23.5% year-to-date thanks to generous sales incentives. GM is redesigning its Silverado and Sierra models, and the new versions are expected to hit the market this spring. The company is also planning to strengthen its position in this segment by launching new versions of its midsize pickups – the Chevy Colorado and the GMC Canyon – to ensure broad coverage of the truck market.
GM is increasingly doing well in the truck segment, and it’s increasing its competitive pressure against Ford Motor Company (NYSE:F) in the middle term, so it´s certainly a competitor to monitor closely. On the other hand, Ford enjoys remarkable customer loyalty in this business, and a growing market will provide enough room for both companies to benefit from increasing trucks sales over the next quarters.
High-quality cars
Japanese competitors Honda Motor Co Ltd (NYSE:HMC) and Toyota Motor Corporation (ADR) (NYSE:TM) have been well known for producing better and more fuel efficient cars than those built by Ford Motor Company (NYSE:F) and its American peers, but things seem to be changing lately. Ford has achieved remarkable success with products like Fusion and Escape, and this creates a whole new area of promising opportunities for the company.
The Ford Motor Company (NYSE:F) Escape delivered an amazing 52% increase in sales for the month of April versus the same month last year, outgrowing its closest competitor, the CR-V from Honda Motor Co Ltd (NYSE:HMC), by a wide margin. With 98,809 units sold in the first four months of the year, the Escape is now above the Honda CR-V, which sold 91,893 units in the same period.
The Escape has been named “Car of the Year” by Popular Mechanics, and international reception for the product has been encouraging too, so Ford is planning to expand sales in Europe and Asia. If the company can internationally replicate the success it´s having in the US, the Escape could mean a big boost to Ford Motor Company (NYSE:F)’s revenues.
The Ford Fusion is a true game changer for the company, not only in terms of sales, but also when it comes to improving consumer´s perception about the brand and the quality of the cars that Ford Motor Company (NYSE:F) manufactures. The Fusion has won a considerable amount of awards: it has been named “Green Car of the Year,” “Best Car for Families,” and “Best Car for the Money.”
Sales of Fusion increased by 23.7% in April to 26,722 units, doing much better than its competitors the Toyota Camry (-13.9%) and the Honda Accord (-5.2%). Although the Camry and the Accord are still bigger than the Fusion with 31,710 and 33,578 units sold in April respectively, the Fusion is clearly closing the gap and gaining market share versus Japanese competitors.
Building high-quality competitive vehicles is the best kind of free advertising a company can have, and Ford Motor Company (NYSE:F) seems to be enjoying the benefits of a clearly improved product portfolio.
Attractive valuation
From a valuation point of view, Ford still offers plenty of upside potential. In terms of its P/E and forward P/E ratios, the stock is much cheaper than its Japanese competitors Honda Motor Co Ltd (NYSE:HMC) and Toyota Motor Corporation (ADR) (NYSE:TM), yet trading in line with American peer General Motors (NYSE:GM). But Ford pays a juicy dividend yield of 2.9%, while GM pays no dividends at all.
Not only is the dividend relevant in terms of valuation and distributing cash to shareholders, it also shows that management is confident enough in the future of the company to return some of Ford´s cash flow to investors.
In an industry which is known for its tough competitive landscape and capital-intensive business model, Ford Motor Company (NYSE:F) is generating more money than it needs to reinvest in the business, and that should be comforting news to investors in the company.
Bottom line
Ford is benefitting from a recovering truck market thanks to its dominant position in that business with the popular F-Series model. In addition to that, products like Escape and Fusion are proving that the company can successfully expand into other categories and compete head-to-head against Honda Motor Co Ltd (NYSE:HMC) and Toyota Motor Corporation (ADR) (NYSE:TM). The stock is still attractively valued, so maybe it´s time to take a ride in this iconic American automaker.
The article 3 Reasons Why Ford Will Keep Moving Forward originally appeared on Fool.com and is written by Andrés Cardenal.
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