Ford’s Truck Market Share Improving
Ford’s (NYSE:F) truck market share in North America has picked up in recent years from a low of around 16% in 2005 to about 20% this year. Ford competes with automobile players like Daimler (NYSE:DAI), Honda (HMC), GM (NYSE:GM) and Toyota (NYSE:TM) that are trying to acquire lost share during the recession.
The truck share in overall US sales mix is declining, and macro economic factors such as housing, construction and capital investments which influence truck demand also remain muted.
We forecast that market share in North America will remain around 20% while the Trefis community projects that share will rise to around 23%, which translates to 5% upside to our Ford price estimate.
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We currently have a Trefis price estimate of $14.26 for Ford’s stock, about 12% below the current market price of $16.28.
Declining Demand for Trucks
The share of trucks in the US sales mix has decreased from 54.6% in 2005 to 47.5% in 2009, [1] and we expect this trend to continue. Higher fuel prices discourage sales of SUVs and trucks impacting Ford’s revenues. Demand is also tied to macro-economic factors like housing, construction and capital investments that are still muted due to the after-effects of recession.
Currently we estimate that Ford’s US truck business is about 20% of its company value.
Brand Image Rising
According to the 2010 Consumer Reports’ reliability survey, Ford ranks ahead of Mazda and Nissan and ranks just below Lexus, and its vehicles top reliability in two categories: family cars (Fusion Hybrid) and large SUVs (Ford Flex EcoBoost). [2]
Moody’s Investor Service, a credit rating agency, recently upgraded its ratings outlook on Ford based on the company’s improved operating performance and expects stronger earnings and cash flows through 2011. [3]
Toyota’s recall due to product malfunction is still live in people’s minds while the GM and Chrysler’s bailouts allowed Ford to stand out vis-a-vis its domestic peers as a higher quality business. We feel this helps brand image and could benefit Ford longer term and perhaps gain market share.
The average forecast by Trefis community suggests that Ford’s truck market share in North America will increase from 21% in 2010 to 23% by 2016, compared to the Trefis estimate of roughly 20% during the same period.
Our complete analysis for Ford’s stock is here.
Notes:- Taken from the company’s SEC filings [↩]
- Consumer Reports’ Reliability Survey: Ford ranks high, GM up, Germans (except for Porsche) down [↩]
- Moody’s raises Ford, Ford Credit ratings [↩]