Ford’s #1 Market Share In Houston Should Alleviate Inventory Concerns
Ford posted a Two.1% decrease in U.S. auto sales during August two thousand seventeen compared to August 2016, which came in slightly better than estimates.
The truck segment – including the F-Series – posted an encouraging month to thrust the average sales price up $1,300 compared to the industry average of $140.
Despite a negative influence on August sales, Ford has the highest market share in Houston where hundreds of thousands of cars will need to be substituted due to flooding.
Ford (NYSE:F) announced August two thousand seventeen U.S. vehicle sales of almost 210K, down Two.1% from the same month in 2016. Despite this decrease, it exceeded the 6.4% estimate from Edmunds. For the year, Ford has sold approximately 1.7 million vehicles, which is a Four.1% decline compared to 2016. These metrics are largely consistent with the overall auto industry which witnessed a 2% decrease in August compared to 2016, which puts the industry on tempo to reach 16.Trio million sales for the year compared to 2016’s record year of 17.6 million. Ford’s decrease in August sales is largely due to a 9% decrease in car and 11% decrease in SUV sales, partially offset by a 9% increase in trucks. Overall, retail decreased slightly higher than latest months, Two.7% compared to only 1% in July, while fleet remained remarkably constant at only a 0.2% decline.
The shift from cars to SUVs and trucks is a continued positive trend for Ford largely due to the success of the F-Series trucks (up 9.2% YTD) and enhancing popularity of SUVs – Explorer (up Five.5% YTD) and Edge (up 0.5% YTD). It is continuing to sell the right mix of vehicles in the U.S. which further shoved up average transaction price up $1,300 compared to the industry average of only $140. This shows that Ford isn’t just taking advantage of cars being loaded with more safety features and connectivity options, but it is flawlessly placed to take advantage of the consumer shift away from cars to larger vehicles. The largest contributor to this was the Ford F-Series Super Duty pickup which represented 53% of the retail sales mix and contributed a $45,600 per truck price tag, which was a $Three,400 increase from August 2016. Additionally, the Ford Explorer and Edge continued to fuel an awesome year-to-date through August for the Ford brand SUV segment.
With the fleet sales being largely a non-story this month, the fresh story is the influence of Hurricane Harvey. Some estimates indicate that up to 50,000 fresh vehicles shipped could have been delayed as an influence of the storm, but the automakers are expected to make it up and then some in the remainder of the year. Houston is in the top ten largest cities in the United States and has a very high car ownership rate. Early predictions estimate that up to 500,000 vehicles could have been lost in the storm, which is more than the number of cars the Houston market averages in one year. Ford has performed particularly well in Houston and has the largest market share at 18%. This should help alleviate rising inventory levels that have been very concerning. Ford’s car inventory finished August at 630,801 vehicles, or 81-day supply, which is up from 616,824 vehicles, or seventy seven days, in July. Despite this increase, it is still down from a year ago where inventory stood at 639,967 vehicles, or seventy eight day supply.
Looking outside of the U.S., Ford posted a 7% decrease in July sales to increase its sales in China to over 622K vehicles. While it has been a mostly disappointing embark to two thousand seventeen with year-to-date sales down 7% compared to the same period in 2016, there is some optimism after June’s report. June’s success was mainly driven by increases in the car segment – the Escort enhanced 30%, Mondeo 28%, and Taurus 11%. Unluckily, the rhythm slowed disappointingly in the very first five months of 2017. However, the one bright spot is the company eyed similar success with its SUVs in the U.S. The Ford Everest sales enhanced 82% year over year and the Lincoln branded SUVs (MKC, MKX, and Navigator) all witnessed double-digit increases for the month. Additionally, Ford recently announced plans to form a joint venture with Anhui Zotye Automobile Co. to create a fresh brand for fully electrical vehicles. This comes as the Chinese government is attempting to drastically reduce pollution in major cities and those cities are suggesting incentives to shove consumers toward electrified vehicles. Presently, China accounts for 40% of the world’s electrical vehicle sales and this should give Ford access to Zotye’s customers. Zotye reported a 56% increase through July this year to shove its total sales to 56%. With the 50% joint venture, Ford will come in the market that General Motors (NYSE:GM) and Volkswagen (OTCPK:VLKAF) have already entered.
This continued slowing in 2017, in addition to other possible threats such as the overall health of the U.S. economy, further interest rate hikes and emergence of fresh competitors in the auto industry, is weighing strongly on investor sentiment. If there was an event or condition that coerced the U.S. economy back into slowing growth territory or a global recession, it would certainly have a major influence on Ford. Furthermore, with further interest rate hikes announced, it is expected that the automotive market is hitting a peak domestically and may commence to trend downwards. Additionally, with fresh companies working to produce technology-infused vehicles such as Tesla (NASDAQ:TSLA), Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) , it is significant that Ford stays ahead of this curve and doesn’t fall behind when it comes to the technology use in the vehicle.
Despite declining sales, Ford’s stock spotted an increase after posting these numbers. The stock is trading just over $11 per share with a PE ratio of approximately twelve (both figures as of the beginning of 9/1/17); it emerges to be undervalued compared to the current S&P five hundred mean P/E ratio of 15.67. Given the low valuation and the company’s dividend yield around 5%, I believe the stock is attractive at current prices. While the domestic auto sales are clearly peaking, Ford is flawlessly placed to increase its average transaction price with its larger vehicle suggesting including the F-Series, Edge, Ripple and Explorer. Additionally, the stock should see some favorability as Houston recovers from Hurricane Harvey where it has a strong market share. With this low valuation and this favorability, I expect Ford to finish out two thousand seventeen ahead of competitors.
Given this low valuation and the long-term optimism with Ford, I’m utterly encouraged by the U.S. sales results. I’m excited about the company’s future. With consumers purchasing more expensive vehicles, it will permit Ford to report stronger top-line and bottom-line growth going forward. Furthermore, I believe Ford has a strong product mix to take advantage of the growing market and will pay investors an above-5% dividend yield to own the stock.
Disclosure: I am/we are long AAPL.
I wrote this article myself, and it voices my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Ford – s #1 Market Share In Houston Should Alleviate Inventory Concerns – Ford Motor Company (NYSE: F), Seeking Alpha
Ford’s #1 Market Share In Houston Should Alleviate Inventory Concerns
Ford posted a Two.1% decrease in U.S. auto sales during August two thousand seventeen compared to August 2016, which came in slightly better than estimates.
The truck segment – including the F-Series – posted an encouraging month to shove the average sales price up $1,300 compared to the industry average of $140.
Despite a negative influence on August sales, Ford has the highest market share in Houston where hundreds of thousands of cars will need to be substituted due to flooding.
Ford (NYSE:F) announced August two thousand seventeen U.S. vehicle sales of almost 210K, down Two.1% from the same month in 2016. Despite this decrease, it exceeded the 6.4% estimate from Edmunds. For the year, Ford has sold approximately 1.7 million vehicles, which is a Four.1% decline compared to 2016. These metrics are largely consistent with the overall auto industry which spotted a 2% decrease in August compared to 2016, which puts the industry on tempo to reach 16.Trio million sales for the year compared to 2016’s record year of 17.6 million. Ford’s decrease in August sales is largely due to a 9% decrease in car and 11% decrease in SUV sales, partially offset by a 9% increase in trucks. Overall, retail decreased slightly higher than latest months, Two.7% compared to only 1% in July, while fleet remained remarkably sustained at only a 0.2% decline.
The shift from cars to SUVs and trucks is a continued positive trend for Ford largely due to the success of the F-Series trucks (up 9.2% YTD) and enlargening popularity of SUVs – Explorer (up Five.5% YTD) and Edge (up 0.5% YTD). It is continuing to sell the right mix of vehicles in the U.S. which further shoved up average transaction price up $1,300 compared to the industry average of only $140. This shows that Ford isn’t just taking advantage of cars being loaded with more safety features and connectivity options, but it is ideally placed to take advantage of the consumer shift away from cars to larger vehicles. The largest contributor to this was the Ford F-Series Super Duty pickup which represented 53% of the retail sales mix and contributed a $45,600 per truck price tag, which was a $Trio,400 increase from August 2016. Additionally, the Ford Explorer and Edge continued to fuel an awesome year-to-date through August for the Ford brand SUV segment.
With the fleet sales being largely a non-story this month, the fresh story is the influence of Hurricane Harvey. Some estimates indicate that up to 50,000 fresh vehicles shipped could have been delayed as an influence of the storm, but the automakers are expected to make it up and then some in the remainder of the year. Houston is in the top ten largest cities in the United States and has a very high car ownership rate. Early predictions estimate that up to 500,000 vehicles could have been lost in the storm, which is more than the number of cars the Houston market averages in one year. Ford has performed particularly well in Houston and has the largest market share at 18%. This should help alleviate rising inventory levels that have been very concerning. Ford’s car inventory finished August at 630,801 vehicles, or 81-day supply, which is up from 616,824 vehicles, or seventy seven days, in July. Despite this increase, it is still down from a year ago where inventory stood at 639,967 vehicles, or seventy eight day supply.
Looking outside of the U.S., Ford posted a 7% decrease in July sales to increase its sales in China to over 622K vehicles. While it has been a mostly disappointing commence to two thousand seventeen with year-to-date sales down 7% compared to the same period in 2016, there is some optimism after June’s report. June’s success was mainly driven by increases in the car segment – the Escort enhanced 30%, Mondeo 28%, and Taurus 11%. Unluckily, the rhythm slowed disappointingly in the very first five months of 2017. However, the one bright spot is the company eyed similar success with its SUVs in the U.S. The Ford Everest sales enhanced 82% year over year and the Lincoln branded SUVs (MKC, MKX, and Navigator) all eyed double-digit increases for the month. Additionally, Ford recently announced plans to form a joint venture with Anhui Zotye Automobile Co. to create a fresh brand for fully electrified vehicles. This comes as the Chinese government is attempting to drastically reduce pollution in major cities and those cities are suggesting incentives to thrust consumers toward electrified vehicles. Presently, China accounts for 40% of the world’s electrified vehicle sales and this should give Ford access to Zotye’s customers. Zotye reported a 56% increase through July this year to thrust its total sales to 56%. With the 50% joint venture, Ford will inject the market that General Motors (NYSE:GM) and Volkswagen (OTCPK:VLKAF) have already entered.
This continued slowing in 2017, in addition to other possible threats such as the overall health of the U.S. economy, further interest rate hikes and emergence of fresh competitors in the auto industry, is weighing strongly on investor sentiment. If there was an event or condition that compelled the U.S. economy back into slowing growth territory or a global recession, it would certainly have a major influence on Ford. Furthermore, with further interest rate hikes announced, it is expected that the automotive market is hitting a peak domestically and may embark to trend downwards. Additionally, with fresh companies working to produce technology-infused vehicles such as Tesla (NASDAQ:TSLA), Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) , it is significant that Ford stays ahead of this curve and doesn’t fall behind when it comes to the technology use in the vehicle.
Despite declining sales, Ford’s stock witnessed an increase after posting these numbers. The stock is trading just over $11 per share with a PE ratio of approximately twelve (both figures as of the beginning of 9/1/17); it emerges to be undervalued compared to the current S&P five hundred mean P/E ratio of 15.67. Given the low valuation and the company’s dividend yield around 5%, I believe the stock is attractive at current prices. While the domestic auto sales are clearly peaking, Ford is ideally placed to increase its average transaction price with its larger vehicle suggesting including the F-Series, Edge, Ripple and Explorer. Additionally, the stock should see some favorability as Houston recovers from Hurricane Harvey where it has a strong market share. With this low valuation and this favorability, I expect Ford to finish out two thousand seventeen ahead of competitors.
Given this low valuation and the long-term optimism with Ford, I’m enormously encouraged by the U.S. sales results. I’m excited about the company’s future. With consumers purchasing more expensive vehicles, it will permit Ford to report stronger top-line and bottom-line growth going forward. Furthermore, I believe Ford has a strong product mix to take advantage of the growing market and will pay investors an above-5% dividend yield to own the stock.
Disclosure: I am/we are long AAPL.
I wrote this article myself, and it voices my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.