F-150 Sales Power Ford Past Estimates

Ford's (NYSE: F  ) U.S. sales were up 13% in June, thanks to very strong pickup sales – and to sales of smaller cars and SUVs, an area that has become a surprising source of strength for the Blue Oval.

Ford's results beat the analyst consensus estimate of 12%, according to Bloomberg. And digging into the numbers, it's looking like the economic factors driving Ford's recent sales increases will continue to drive gains for a while longer.

That's good news for Ford's profits. Here's why.

Why small cars now mean big profits for Ford
Ford sales analyst Erich Merkle said on Tuesday that a couple of key economic factors are driving sales trends in the industry that happen to benefit Ford in particular. First, consumers making new-vehicle purchases are choosing smaller cars and SUVs. Many are replacing vehicle that were bought several years ago, when fuel prices were lower – and that means that overall demand for smaller and more fuel-efficient vehicles is up.

That helps Ford, because the company has placed a big emphasis on becoming more and more competitive in those parts of the market. Products like the Escape SUV, the Focus, and the Fiesta all include high-tech features that were traditionally the kinds of things found mainly in larger and more luxurious offerings – things like high-tech "infotainment" and navigation systems, as well as luxury features like heated seats.

As a group, sales of Ford's small cars (the Focus, Fiesta, and C-Max hybrid) were up 39% over last June's totals, and the Escape posted its best monthly sales total ever.


High-tech features and thoughtful touches have made Ford's Escape a big hit. Photo credit: Ford Motor Co.

For consumers who are – for instance – looking to trade in a big SUV they bought in 2005 for something more fuel efficient, the luxury-like features in an Escape help them feel like they're not stepping down in terms of driving experience. Ford's emphasis on premium interiors and high-tech features makes products like the Escape and the Focus feel more luxurious than some of their competitors, and that gives Ford an incremental advantage with those kinds of buyers.

That emphasis has also helped boost Ford's profits. Premium features help Ford command higher prices, and options like the MyFord Touch system and deluxe interior features are high-margin items that add extra profits to those sales. That's one big part of how Ford has managed to raise its profit margins in North America to well over 10%, among the highest in the business.

Here's another big part: pickup sales.

Pickups are big business, and they're booming
Sales of full-sized pickups have been very strong in recent months, well ahead of the overall vehicle market. Merkle attributes that to upswings in new-home construction and in the energy sector. Both industries include many businesses that buy pickups for commercial use, and both are taking advantage of stronger business conditions to replace pickup fleets that in many cases have become quite old.


Ford's top-of-the-line F-150 Limited is a very luxurious – and very  profitable – truck. Photo credit: Ford Motor Co.

Ford's F-Series is the leading line of full-sized pickups, so any upticks in the segment generally mean good things for the Blue Oval. June was no exception: F-Series sales were up 24%, for the model line's best June result since 2006.

Pickups are among Ford's most profitable products, and because they sell in such big volumes (68,009 last month alone), the F-Series line is almost certainly the single biggest contributor to Ford's global bottom line. And in the last few years, Ford has become very good at boosting pickup profits with premium packages that, like the options on its smaller cars, add considerably to per-sale profits.

All this adds up to strong profits for Ford
June's results close out a quarter where Ford gained market share in the U.S., and did so with products that it has positioned to boost its profits. Ford is set to report second-quarter earnings later in July, and while the rest of the world remains a complicated story, the company looks likely to post strong earnings in its core North American division.

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Read/Post Comments (4) | Recommend This Article (4)

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 July 02, 2013, at 9:32 PM, guysisson wrote:

    Ford trucks are the best trucks built. They have been Americas favorite truck for almost 40 years for a good reason. I have a 2012 F-150, it is one of the finest vehicles you will ever drive.

  • Report this Comment On July 02, 2013, at 11:27 PM, dwiunit wrote:

    My dad had a brand new 1983 F100 regular cab with a/c and heat and fm/am stereo cassette with 282,000miles and he brought a brand new 2004 F150 lariat Supercrew in 2004 which now has 123,000miles.I have an 02 ranger with 169,200miles and both the 02 Ranger and 04 F150 are still running like new.Even my uncle still has his 2003 F150 Supercrew with 120,000miles and his truck still runs like new.

  • Report this Comment On July 02, 2013, at 11:32 PM, dwiunit wrote:

    Even my mom's 2006 Escape XLT and my aunt's Windstar XL and my other aunt's 06 Explorer Eddie Bauer are still running like new and all three vehicles have 100,000miles each on them.

  • Report this Comment On July 03, 2013, at 4:26 AM, wpmaceri wrote:

    I'm really happy to see FoMoCo recieve all the positive press lately. There's no doubt well deserved, and a long time coming. I'm a total motorhead, have been all my life. That said I have only and will only drive Fords, and over the years, those around me that needed to drive expensive imports back in the 80's, are all driving Fords one way or another, and they all love them and understand what I have been talking about for so long. Make no mistake, Ford has come a long way in the last twenty years, but the feeling that I get driving Fords has not changed. It seems the more you drive them, the better they run. Just do the required maintenance, and you can drive a Ford any place, with the best part being, it will take you back home. Ford's heritage is very much a part of it. I love road tripping accross the US, I"ve been doing it since I was a kid. I noticed early on, that no matter where you are in the US, even in the smallest of towns, as you drive through all those little towns, one thing stands out, some where on main street USA, you will spot the big blue oval of the local Ford dealer that's most likely been there for around 100 years now thanks to Henry Ford's vision. While there are many great things about this country, but the one thing that really makes me feel like a true american, is driving my Fords, and knowing they have "first rights of presence" no matter where you are all over the US. I'm telling you that's a great feeling, it makes me feel I'm doing something right. As the original Ford commericals said, "just sit back and watch the Fords go by... Yeah man!

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