How can you tell when Ford (NYSE:F) is gearing up for a huge quarter?
Answer: Watch its U.S. sales numbers. When sales of pickups and SUVs are great, profits are likely to be great, too.
Ford's a giant global company. Events around the world matter a lot. But right now, with its European unit in recovery mode and a big expansion still under way in Asia, U.S. sales are especially important to Ford's bottom line.
If analysts' estimates for September sales turn out to be on the mark, Ford's third-quarter profit could turn out to be quite excellent.
A good month for the market, a better one for Ford?
Analysts at TrueCar say that the U.S. new-vehicle market appears to be on track for a 12.6% year-over-year increase in September. That's roughly in line with what most other analysts are saying.
September's sales results will benefit from the fact that there's one more "sales day" this month than in September of 2014 (or put another way, one fewer Sunday.) But the market is still doing very well because generally speaking, it's a great time to be selling autos in the United States.
Interest rates are still low, the economy is in pretty good shape, gas is cheap, and the average age of a vehicle on U.S. roads is still over 11 years. All of that means that demand is strong, and it's especially strong for trucks and SUVs, the products that bring home the biggest profits for most automakers.
That plays especially well to Ford's strengths. TrueCar thinks that Ford is poised to have a better month than most of its rivals, with sales rising 18.7% -- way ahead of the overall market.
What's driving that? We'll find out for sure when Ford releases its numbers on Thursday. But it's a safe bet that SUVs, commercial vans, and pickups have a lot to do with the gains that analysts are seeing.
F-150 sales are probably up to full speed
The big story for Ford's sales in September is likely to be the F-150 pickup. After months of making do with short supplies as Ford ramped up production of the new-for-2015 F-150, dealers now have plenty of trucks to sell.
It's likely that Ford has also stepped up its sales of pickups to its commercial-fleet customers. Ford prioritized retail sales over fleet sales while supplies were short, but commercial-fleet sales are an important (and profitable) part of Ford's truck business.
The upshot is likely to be a nice jump in F-Series sales for Ford in September. But there's probably more to the story. Those commercial-fleet buyers have been buying a lot of Ford's new Transit vans, and it's likely that van sales jumped again in September.
SUVs were the big driver of profits for Ford in North America in the first half, as it worked on getting its pickup factories back up to full speed. Ford's SUVs are well-regarded, and sales in the last few months have been great -- so great, in fact, that a few of Ford's factories are just about maxed out.
That's both good and bad. On the one hand, Ford is unlikely to get much sales growth on models like the Escape in the near term, because it simply can't make them any faster. On the other hand, a maxed-out auto factory is a very profitable thing -- especially if it's building high-margin products like SUVs.
Some of Ford's SUV models still have room for year-over-year sales growth, though. The all-new-for-2015 Edge and the refreshed-for-2016 Explorer may post nice year-over-year gains in September as well. The Edge's sibling, the all-new Lincoln MKX, may also have a good month.
The upshot: Strong U.S. sales should mean a great quarter for Ford
Ford's U.S sales numbers for July and August were quite good, with strong sales of high-profit products. Another big month in September would set Ford up very well for a strong third-quarter profit.
Ford executives have been saying that the second half of 2015 would be particularly profitable. Based on the patterns we're seeing in the sales numbers, I'd say that's looking like a pretty good prediction.