Ford Motor Company's May Sales: The Highlights Investors Need About the 3 Most Important Regions

Ford Motor Company (NYSE: F  ) and its media team work hard to maximize the effectiveness of their press releases, and they do a very fine job. Unfortunately, for those investors who don't have the time to keep a constant eye on daily events, vital sales information is released on different days and can be easily missed. So, to help you keep up with the information overload, and make better investing decisions, here are the sales highlights from May for Ford's three most important regions, all in one place.

First up... China
Let's start with the most pleasant news, coming from the world's largest automotive market. Last month, Ford's results in China continued a string of impressive sales gains. Starting in January, compared to the prior year's month, Ford's sales gains have checked in at 54%, 67%, 28%, 29%, and finally May's gain of 32%.

Expect Ford's sales trend in China to continue higher. Source: Ford Motor Company's sales releases.

Back in 2012, Ford recognized that it was missing a substantial opportunity for growth in China, and wagered that $5 billion in investments would be enough to send its market share to new heights... and it has. Ford's sales surpassed two Japanese rivals in China last year, Toyota and Honda, to rank the Blue Oval as the fifth-best-selling foreign automaker in the country. Even better, with Ford's sales up 39% through May, to 461,473 units, it's on pace to catch Nissan, which posted a 15% increase to 507,700 units during the same time frame, in roughly a year.

Don't expect Ford's double-digit sales increases to end anytime soon, either. Sales of the Focus and Fiesta continue to dominate in China, and will continue to be the company's foundation for solid gains. Consider that sales of the Focus in China grew 50%, from 268,000 vehicles in 2012 to more than 403,000 vehicles last year. That significantly tops the Focus' 234,000 sales in the U.S. last year.

In addition to its key Focus and Fiesta sales, Ford launched the EcoSport, Kuga (Escape), Explorer, and Mondeo (Fusion) in China last year, which will help drive sales while the market waits for additional launches, such as the Mustang and Escort. China will remain Ford's key focus to lessening its dependence on North America for the vast majority of its revenue and profits.

Ford's Fiesta remains a vital portion of sales in Europe. Source: Ford Motor Company

Next up... Europe
At first glance, Ford's sales figures in Europe look a bit disappointing, especially compared to the figures coming out of China. Ford's European sales posted a slight decline in May of 900 units, or 0.9%, to nearly 99,000 units. However, that decline doesn't tell the full story.

Ford's May results were up against a very tough comparison because the prior year's May had largely inflated sales. Through the beginning of 2013, the supply of a handful of Ford cars was constrained due to a Belgium factory work stoppage. When supply came in full force during May, sales figures received a long-awaited jolt.

A better look at Ford's performance in Europe would be to view the year-to-date sales. Through the first five months of the year, Ford's sales increased 7.7% in Europe, compared to last year, which was 110 basis points higher than the industry average 6.6% growth.

What's most important for investors diving into Ford's European results is the company's focus on profitability. Ford has burned roughly $3.4 billion during the last eight quarters in the region, and Europe has remained a drag on the company's overall profits for years.

To help the company achieve its goal of profitability in Europe next year, the automaker has focused on improving its sales mix to more desirable retail and fleet sales, while selling less vehicles to rental fleets and dealer registrations. Ford increased its retail and fleet sales by 100 basis points, to 72% of total sales; on the other end, slightly less desirable sales to daily rental and dealer registrations dropped to 28% of the total mix. As that trend continues, it should boost Ford's brand image and residual car values.

Another important piece of information is that more than 50% of Ford's sales through May were all-new or significantly refreshed vehicles. As new vehicles command higher transaction prices, and need fewer incentive payouts to sell, it means more than half of Ford's sales will be boosting its top and bottom lines with more of an impact.

Not to be forgotten
Last, but definitely not least, the driving force behind Ford's success and accounting for the majority of its revenue and profits -- the good old U.S.

While Ford's sales gains in the U.S. for May lagged behind the industry average, its 3% gain was ahead of estimates that projected a slight decline. One of the biggest takeaway's from its May results in the U.S. is that Ford's popular vehicles are still very popular.

Ford's Escape and Fusion continue to be driven off dealer lots at a rapid pace, and the two vehicles posted sales gains, compared to last year, of 10% and 15%, respectively. It was the first time sales of the Escape topped 30,000 in a single month, and both the Escape and Fusion set all-time monthly records in May.

America's best-selling vehicle for more than three decades now, the F-Series remains Ford's single most important and profitable product. Sales of the F-Series in May dropped 4.3% compared to gains of 8%, 14%, and 17% for competing Silverado, Sierra, and Ram trucks, respectively.

The F-Series losing a bit of ground to competitors is certainly something to keep an eye on, but management noted during the sales call that there's nothing to worry about because Ford's focus is to keep sales of its outgoing model -- the all new F-150 is due out later this year -- as profitable as possible.

So far, so good, as the F-Series has the highest average transaction price and lowest incentives compared to GM's and Fiat Chrysler Automobile's competing trucks. In addition to each sale remaining very profitable, the long-term trend of F-Series sales is still very healthy -- which is great news for investors.

Ford's F-Series sales remain healthy despite May's decline. Source: Ford Motor Company's sales releases.

Foolish takeaway
Looking at the results from Ford's three most important markets, investors should be happy with the company's progress. Europe represents the fastest way for Ford to juice its earnings and, considering last year's $1.6 billion loss would have added nearly 19% earnings growth had the company simply broken even, investors should look toward that break-even point next year with much excitement.

China is already the world's largest automotive market, and will continue to grow at a rapid pace. Expect Ford to take advantage of this growth, and significantly boost its top-line revenues throughout this decade from its quickly ballooning sales in the country.

Last, but not least, while Ford makes progress in Europe and China, expect Ford's most aggressive vehicle launch schedule in history to fuel sales and profitability in 2015 and beyond. Ford's turnaround story is still far from over, and so far, it's looking pretty good.

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Daniel Miller

As a Motley Fool Industrial Specialist, I use my marketing and business background in the automotive industry to evaluate major automakers and other large industrial corporations. Follow me on twitter for tweets about stocks, cars, sports, and anything I find amusing.

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8/31/2015 3:53 PM
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