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Is a Big Gain in Store for Ford?

John Rosevear
February 29, 2012

Is Ford (NYSE: F  ) poised for a sales breakout?

It's looking possible. U.S. auto sales are finally starting to gather steam, industry watchers say, with February's sales totals set to build on the strong overall results seen in January. Ford itself says that sales of its key compact car are up sharply. And other signs suggest that Ford could be gaining market share, even as key Japanese rivals work hard to pick up the pace.

Strong results in an improving economy
The industry analysts at Edmunds are expecting February's numbers to show a big jump, with sales up 19.9% over January's strong totals and up 10.3% over last year. That's expected to put the SAAR, or Seasonally Adjusted Annualized Rate of auto sales (a widely watched industry indicator) at 14.4 million, up from an already impressive 14.1 million last month.

That's good news for all of the automakers. But it's particularly good news for Ford, which may be grabbing market share. Edmunds expects Ford's February sales to come in at 35.6% above January's numbers, good for a substantial 18.3% YOY gain.

What's driving that? We won't know for sure until Ford reports its sales later this week, but some factors are already apparent. Mild weather in the northern states may be boosting overall sales, and as Edmunds' Jeremy Anwyl recently noted, more older vehicles are being traded in than at any point since the "Cash for Clunkers" months in 2009. That suggests that consumers who have been postponing car purchases might finally be willing to spend, a sign that this rise in sales could go on for a while.

Ford's finding that small is sweet
Rising gas prices may be pushing more buyers toward smaller cars, a trend that -- unlike in past years -- may work in Ford's favor. Ford said on Monday that sales of its Focus compact were expected to double in February versus year-ago numbers, which would make it the best month for the model in over a decade.

If that result holds up -- and if it's driven by retail sales instead of low-margin fleet sales to rental-car companies -- it will be impressive. The current Focus, like its smaller sibling, the Fiesta, has won critical accolades ever since its introduction, and for good reason: They're Ford's best-ever small cars, and rank with the best in the world. But while the Focus has been a strong seller in Europe and elsewhere, it hasn't yet managed to gain significant ground here on segment leaders from Toyota (NYSE: