Today wasn't as much fun for investors in the automotive industry as was planned. While Fiat Chrysler Automobiles and General Motors posted respective gains of 5.6% and 4.2%, compared to last year's February, both failed to live up to sales expectations.
Meanwhile, Ford Motor Company (NYSE:F) was seemingly the biggest loser, posting a sales decline of 2% compared to expectations of a near 6% gain. Overall, sales were slightly weaker than expected across the industry, which could have been the result of more severe winter weather in the back half of February.
What's the deal with Ford's surprise decline in sales? Is there a bright spot in the Dearborn automaker's February results?
First things first
It's worth noting that while the industry -- at least those automakers that have reported as of this writing -- may have posted a weaker month for sales than expected, investors should keep in mind that January and February are historically weaker months, and sales performances in those months shouldn't be extrapolated for the whole year. In fact, this is much the same compared to last year, before the industry went on a sales rampage for the remainder of 2014.
With that said, one of the biggest factors in Ford's particularly weaker sales results was a decline in fleet sales. Ford has said all along that it planned on reducing its overall fleet sales and improving the mix of the remaining fleet sales -- i.e., more commercial and government, and less daily rental fleet sales.
Consider that while Ford's overall sales were down nearly 2% in February, its fleet sales were down to 30% of sales from last year's 32% mark. Better yet, Ford's daily rental fleet sales were down from 13% of overall sales last February to 11% last month -- suggesting that Ford is indeed reducing the less-preferred fleet sales, and thus affecting its overall sales result.
That doesn't mean Ford has a get-out-of-jail-free card, though: There are some definite weak spots in its February sales results. Looking by segment, sales in Ford's car segment were down 8% in February compared to last year. Also, and perhaps more surprisingly, its utility segment was down 2.3% compared to last year. The only segment to post a year-over-year sales gain was trucks.
There were a few bright spots in Ford's February sales results as well. One that caught my eye was the surging sales of the iconic Mustang. Overall, sales of the 'stang were up almost 32% last month, aided by more than 130% and 40% respective gains in its two largest markets, California and Texas. This is a great sign early on, as Mustang sales tend to pick up in the North and Northeast markets as spring gets into full swing.
Another bright spot isn't found within the numbers, but rather in the conference call details. Ford's most profitable vehicle, the F-150, posted a roughly $2,000 increase in average transaction prices, and models keep flying off dealer lots at a rapid pace.
Consider that Ford's premium trims, the King Ranch and Platinum F-150, are turning over at a rate of just 16 days and 12 days, respectively -- a fraction of the time vehicles typically spend on dealership lots. Also, furthering the trend of fleet sales hurting overall sales, fleet sales of the F-Series were down 18%, but more important, retail sales were 7% higher compared to last February.
Lastly, one of Ford's more profitable vehicles, the Explorer SUV, posted a strong sales increase of nearly 32% in February to more than 17,000 units sold -- making it Ford's fourth-best-selling vehicle last month.
What it all means
It's clear the market isn't thrilled with Ford's performance, as the stock is trading nearly 3% lower as of 12:30 p.m. ET. While it's true that the company's performance was much weaker than expected, investors shouldn't truly worry about Ford's sales in these historically weaker months.
However, if Ford sales continue to disappoint as its best-selling F-150 ramps up production -- its second production plant comes on-line this month -- it will be cause for concern. Until then, I personally expect sales will rebound during the second quarter and result in a strong overall 2015.