Ford's Hot F-150 Sales Look Set to Continue


Ford's top-of-the-line F-150 Limited is a very well-equipped truck, and a very profitable product for Ford. Photo credit: Ford Motor Co.

Good news for Ford (NYSE: F  ) , and for General Motors (NYSE: GM  ) and Chrysler as well: Pickup sales have been up sharply in recent months.

Sales of Ford's F-Series line, the F-150 and its Super Duty siblings, were up 31% in May – a huge jump that far outpaced the overall market's gains. What's more, F-Series buyers have been opting for more expensive pickups.

What's driving those trends? And what do they mean for Ford's bottom line?

A perfect economic storm for pickups – in a good way
There are a couple of things driving this big jump in pickup sales. One is what auto executives call "pent-up demand". The average age of a pickup in the US is around 11 years old right now. That's older than the historical norm, and it suggests that a lot of people and businesses have been waiting to buy – likely because the economy has been tight.

Another factor is the economy – specifically, that a couple of parts of the economy that are correlated with pickup sales have been picking up steam. Ford sales analyst Erich Merkle says that increases in new-home construction and oil-field services have both driven demand for Ford's pickups.

Both are likely to continue to drive demand for some time. And that's a very good thing for Ford's profits.

Pickups are the fuel that powers Ford's engine
Ford divides its business into several geographical regions, and the one that has carried the business lately is North America. Sales, margins, and profits in North America have all been great for Ford. And pickups have a lot to do with that: Morgan Stanley analyst Adam Jonas said late last year that F-Series sales might account for as much as 90% of Ford's global profits.

There are two reasons why the F-Series is such a big contributor for Ford. First, these pickups sell in really big numbers. Ford sold over 70,000 F-Series pickups in May alone. For comparison, Ford sold 29,553 Fusions in May – and the Fusion is a hot seller. But the F-Series has been America's best-selling vehicle for over 30 years, and a very big part of Ford's business the whole time.

Second, full-sized pickups like the F-Series are very profitable products, with high margins. And those margins may be getting higher. Ford has been working hard to lower its reliance on incentives, which cut into profits.

Ford has also been working to increase average transaction prices by adding features and options packages that make buyers want to spend more. That strategy has been especially apparent on the F-Series, where Ford has introduced more upscale packages in recent years. And it's paying off with much-improved profit margins for Ford in North America.

Trends are moving in Ford's direction
Consider this: Ford's F-150 starts at $23,955 – but in top-of-the-line, limited trim, like the red truck shown above, the price tag is well north of $50,000. A lot of that difference is profit for Ford.

Analysts at Edmunds say that transaction prices for full-sized pickups have risen by 29% since 2005, while overall transaction prices for the industry as a whole have risen about 13%. A lot of that has to do with those extra options packages, a strategy that has been picked up (so to speak) by GM and Chrysler as well.

A Ford official was quoted by Automotive News recently as saying 30% of F-150 retail sales and more than half of Super Duty sales are "high series" versions like the Limited and King Ranch editions. Ford's strategy of encouraging buyers to pay more for more features appears to be working out well.

That success has been a big contributor to Ford's recent profits – and the trends favoring pickup sales should help Ford post more good numbers in coming quarters.

Strong pickup sales are just one of several good reasons to think that Ford still has big growth opportunities ahead. The Fool's premium Ford research service outlines those opportunities. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place – click here to get started now.


Read/Post Comments (8) | Recommend This Article (1)

Comments from our Foolish Readers

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 June 11, 2013, at 9:10 PM, guysisson wrote:

    I work on all makes of trucks for a living and Ford is definitely building the best trucks on the road today. There is a reason that they have been Americas favorite truck for almost 4 decades.

  • Report this Comment On June 11, 2013, at 10:26 PM, pa7890 wrote:

    i think your smoking something and besides that if you take the chevy or gmc together they have out sold the f-150 for yrs , you must work for ford

  • Report this Comment On June 12, 2013, at 12:25 AM, wgutchy wrote:

    i work on all types of trucks and glad ford makes trucks because I'm always working on these trucks and i"ll always have a job. Just saying Thank You Ford.

  • Report this Comment On June 12, 2013, at 12:46 AM, gtessex wrote:

    Whomever said the combo of Chevy and GMC pickups is outselling Ford obviously hasn't been following sales figures lately! Not even close.

    May 2013 sales

    Ford F-series = 71,604

    Chevy Silverado = 43,283

    GMC Sierra = 16,061

    Do the math!

  • Report this Comment On June 12, 2013, at 8:31 AM, ponchoman49 wrote:

    I don't know how so many people today can afford these things. The average extended cab with cloth seats 4X4, 5.0 liter V8 and a few goodies is well over 40 grand with the 4 door more loaded up models going for 45-48 grand! That is a mortgage payment for god sake. No wonder America is in so much debt today.

  • Report this Comment On June 12, 2013, at 9:28 AM, TMFMarlowe wrote:

    @pa7890: I don't work for Ford. I work for the Fool, where they pay me to analyze and write about auto stocks -- and as it happens, I like both Ford and GM as investments right now.

    This article was focused on Ford, but the story isn't all that different at GM -- except that Ford really did lead the way into the whole luxury-truck thing, and GM is only now catching up.

    As to your point... sometimes GM leads, sometimes Ford leads. Lately, Ford leads.

    Thanks for reading.

    John Rosevear

  • Report this Comment On June 12, 2013, at 10:19 AM, NineD930thTA wrote:

    Fords truck sales will TANK when GM dealers have enough supply of the 2014 models. Every other truck on the road is junk compared to them. We just got our first 2014 in and its Amazing. Its soo quiet, gets better gas than the V-6 Eco Poop motor Ford has, much more room. Its just gorgeous. Ford is gonna have to really do a lot to their F series trucks to compete with the new GM Trucks.

  • Report this Comment On June 13, 2013, at 6:07 AM, TMFMarlowe wrote:

    @NineD930thTA: Ford's truck sales won't tank. But GM will definitely gain some ground, I predict -- and more importantly from a business/investing perspective, they'll gain a lot more profit per truck sold (thanks to some ideas they borrowed from Ford, by the way).

    John Rosevear

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