After a steep fall earlier this year, Ford Motor Company (NYSE:F) stock jumped last week following the company's announcement that it will stop selling traditional sedans in the U.S. by 2020. In contrast, Ford's April sales results -- released on Tuesday -- got a muted response from investors.
However, while Ford's domestic sales declined again last month, the company is benefiting from strong demand for its F-Series trucks and the brand new EcoSport subcompact SUV. As Ford refreshes its lineup of crossovers, SUVs, and trucks over the next two years or so, its sales and earnings in the domestic market should rebound nicely.
April: The high-level numbers
Ford delivered 204,651 vehicles in the U.S. last month, down 4.7% year over year. This was roughly in line with the overall market's decline. That said, there were fewer selling days in April this year than in 2017 (mainly due to the timing of Easter), so the seasonally adjusted sales pace actually increased slightly last month.
Ford's sales performance looks even better when focusing on the retail market, rather than fleet sales. Ford reduced its fleet sales 8.6% year over year in April as it pulled back on low-margin deliveries to rental car companies. Meanwhile, retail sales slipped just 2.6%.
Cars and aging SUVs didn't sell well
In keeping with recent trends, cars were the main source of Ford's domestic sales decline last month. Deliveries of the Ford Fusion -- typically the company's best-selling car model -- plunged 22.9% year over year. In total, car deliveries were down 13.8% for the Ford brand and down 30.5% for the upscale Lincoln brand.
More surprisingly, Ford also posted sales declines in the red-hot market for utilities. The Escape and Explorer are Ford's two best-selling models aside from its massively popular F-Series trucks, but deliveries of both plunged in April.
On the other hand, F-Series sales increased year over year for a 12th consecutive month, with 73,104 deliveries. (This one product line now accounts for 37% of the Ford brand's domestic volume.) Additionally, the brand new EcoSport was able to build on its strong March performance, setting a new monthly sales record of 5,277 units in April.
Finally, all-new versions of the Ford Expedition and Lincoln Navigator full-size SUVs -- both released in late 2017 -- continue to see strong demand. Retail deliveries of the Expedition rose 25.8% last month, while retail deliveries of the Navigator more than doubled. Both models are also seeing massive increases in average transaction prices.
The coming product refresh will be critical
Right now, Ford has two big problems in the domestic market. First, it isn't serving some lucrative market segments, including off-road SUVs and midsize pickups. Second, the high-volume Escape and Explorer models are both well past their primes.
However, the success of Ford's freshest crossovers and SUVs highlights the opportunity from a huge new product cycle that will play out over the next two years or so.
Later this year, the Ford Edge midsize crossover will get a refresh. But the real fireworks will come in 2019. During the course of that year, Ford will reintroduce the Ranger midsize pickup and Lincoln Aviator SUV in the U.S. market, release all-new versions of the Escape and Explorer, begin sales of the crossover-like Focus Active, and update its F-Series Super Duty trucks. The Ford Bronco off-road SUV will also likely return to the U.S. market in late 2019 or early 2020. Other new Ford models are likely to arrive in 2020, too.
The net result is that Ford hopes to have the freshest model lineup in the industry by 2020, with a broader portfolio of crossovers, SUVs, and trucks to cater to current demand trends. Barring a major recession, this should support Ford's ambitious plans to increase its profit margin over the next several years.