Is Ford Stepping It Up?

U.S. auto sales are continuing to look strong as May comes to a close, say analysts, and Ford (NYSE: F  ) is more than holding its own despite a resurgence from the big Japanese automakers.

Fully recovered from the March 2011 tsunami that hindered their global production for months, Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) are aggressively moving to regain lost market share -- but the Blue Oval looks set to post a solid sales gain of its own.

A nice gain coming for Ford?
Edmunds released its sales projections for May on Thursday, and while -- as was widely expected -- they're seeing eye-popping year-over-year gains for the Japanese giants, the company's analysts are also seeing strong results for Ford.

That's good news for shareholders of the Blue Oval: The U.S. is far and away Ford's most profitable market, and concerns were raised last month that the company's production of its most popular models might be maxed out. But with Edmunds forecasting a 24% increase in sales over last month's totals for Ford, and a gain of 0.8% in U.S. market share, those concerns may get set aside.

For the overall industry, Edmunds sees a 17.5% increase over April's numbers, and a 31.1% year-over-year increase -- numbers that, should they pan out, would signal that the American economy is continuing to gather strength. Edmunds analyst Jessica Caldwell attributes the increasing sales strength to two factors: Improved access to credit, and "pent-up demand."

"Pent-up demand" is a shorthand allusion to the fact that many consumers have put off new-car purchases for several years because of the tight economy. Those consumers, the theory goes, have been waiting for better economic conditions before entering the car market -- a theory that may be supported by rising sales in recent months.

Cruising in Ford's wake...
If Edmunds is right, Ford's month-over-month gains will be among the leaders -- but the Blue Oval will be far from the only automaker with something to crow about. The company's analysts see Toyota posting a 15.4% gain over April's totals as it continues to fight its way back to the forefront of the U.S. market. (For a sense of just how much trouble Toyota was having at this time last year, note this increase would represent a 89.5% year-over-year sales gain.)

That gain would be enough to bump Toyota's U.S. market share back up to 15%, a full 4.5 points above its year-ago levels -- though still a bit below where the automaker came in last month. Likewise, Honda is expected to show a modest share decline from last month, as Nissan (OTC: NSANY) and Ford are both seen gaining ground.

Even General Motors (NYSE: GM  ) is expected to get in on the act after a so-so result last month. Edmunds expects the General, which is in the midst of a major global product-line overhaul, to post a 15.4% month-over-month gain of its own, a 11.4% increase over its year-ago numbers. That won't be enough to stave off a slight loss of market share -- 0.3%, says Edmunds -- but it's still a solid result in the face of the Japanese resurgence and Ford's product-driven strength.

The upshot: A promising economic sign
Regardless of how the horse-race details shake out when official results are released next Friday, it's clear that U.S. auto sales are continuing to gain ground. That's a good sign for the overall economy -- auto sales are one of the best indicators of consumers' willingness to spend -- and for shareholders of Ford and GM, both of which make the majority of their profits in North America.

When it comes to the blue oval, a lot of investors see opportunity for America's strongest automaker, but do they understand the key business drivers and risks facing this company? The Motley Fool recently launched an in-depth report on this company outlining Ford's prospects. Download a copy now for insight into reasons you should buy, or perhaps sell, the blue oval. Further, more companies than Ford have plans in fast-growing new markets, and our top analysts have identified three big names that are particularly well positioned to profit. Learn more in our new free report, "3 American Companies Set to Dominate the World." It's completely free for Fool readers, but only for a limited time -- so grab your copy now.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors and have recommended creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 25, 2012, at 7:29 PM, Rujikin wrote:

    I know if I wanted to buy American I would go Ford. Simply because they know how to manage their own business while GM had to get bailed out. GM seems too unreliable to me. Most of the people I know also don't want to buy GM because they had to get bailed out, however they are indifferent when it comes to Ford.

  • Report this Comment On May 28, 2012, at 9:45 AM, dennypat38 wrote:

    When is GM going to start to pay back the 50 BILLION to the TAXPAYERS that they OWE FACT

  • Report this Comment On May 29, 2012, at 5:08 AM, TMFMarlowe wrote:

    @dennypat38: It's not quite that simple. There's not much GM can do right now -- it's the Feds' move. Read here:

    http://www.fool.com/investing/general/2012/03/22/when-will-g...

    John Rosevear

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