Ah, Monday, such a gorgeous day. Unless, of course, you're watching volatility in the S&P 500, Dow Jones Industrial Average, or the Nasdaq -- then it's not so gorgeous. The market was in slight panic mode early this morning, although it has recovered quite a bit, and automotive stocks certainly felt the pressure as doubt continues to hover over China's economy.
Ford Motor Company (NYSE:F) plunged to about $11.50 early Monday morning before recovering to $13.19, which is still down almost 5% for the day. Since investors are increasingly skittish at the moment, here are a couple of things to help you relax. (You can thank me later.)
Much of the current market concern is in regard to the uncertainty surrounding China's economy. Considering China is the world's second-largest economy, that's understandable -- especially for automotive manufacturers that are depending on China to help generate a growth story in the coming years for investors. So, let's take a quick look at some recent figures from Ford.
Just last month, Ford China sold more than 77,000 retail vehicles, which was indeed a 6% decline compared to July 2014 -- panic, sell, sell, sell! But when investors look at sales figures for the full year, it seems like less of a big deal. Consider that from January to July 2015, Ford sold 620,588 units in China, compared to the 624,944 units it sold through the same time frame last year.
Sure, we would like to see growth; we all get that. And when sales figures from August come out, Ford's outlook in China might be worse. However, here's what we do know: Ford has done incredibly well in China over the past few years, growing its annual sales from 626,000 in 2012 to more than 1,114,000 units in 2014. Furthermore, despite a slight decline in wholesale units and revenue in the country in 2015 compared to 2014, look at the increase in margin and pre-tax results, which was a bright spot in Ford's recent second quarter:
Let's also take a moment to look at what has long been a thorn in the side of Ford investors: Europe.
It might be tough to stomach some of the general market headlines this week, but there are actually some positive signs in Ford's Europe business. Its total vehicle sales grew 5.3% in Europe in July, and by 9.7% through the first seven months of 2015. That helped push its market share up by 10 basis points, or 8%, year to date and enabled Ford to remain the No. 2-selling brand in Europe.
"New products continue to drive our sales growth in 2015," said Roelant de Waard, vice president of Marketing, Sales and Service for Ford of Europe, in a press release. "As examples, sales of the EcoSport compact SUV continue to grow, up 164 percent in July over prior year as customer awareness builds, while Mondeo sales are up 70 percent over the same period."
Ultimately, while no market correction is ever fun to sit through, investors would be wise to ask themselves what has changed in their investing thesis. Ford, for instance, is still performing well in the United States, which is its profit engine. Ford's sales in China aren't in free fall, despite the doom and gloom surrounding the market, and its vehicle sales are actually improving in Europe's market. In Ford's recent second quarter compared to last year, automotive operating margins moved 60 basis points higher, to 7.2%, and pre-tax results moved from $2.1 billion to $2.3 billion -- with management emphasizing that profits should increase more through the back half of 2015 as inventory of the 2015 F-150 continues to increase at dealerships across America.
Remaining disciplined with investing can be difficult during market corrections. But remember, these are the times when savvy investors buy good companies, not sell them.