F-Series and Hurricanes Lead To A Strong September For Ford Motors

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After a few challenging months amidst a tough industry environment, Ford Motor Company (NYSE: F)  reported a nearly 9% increase (year on year) in sales in the U.S., compared to the 1-2% for the industry in September. This increase was primarily due to the sales of trucks which gained nearly 20% year on year and SUVs where the company witnessed a nearly 2% increase in sales. The company’s F-Series truck brand continues to drive its sales and in September 2017 Ford Motors sold more than 80,000 F-Series pickup trucks, making it the best September in 13 years. This increase was registered despite a $430 decline (year on year) in incentives for this brand.

According to our estimates, Ford commands a nearly 14% share in the North American truck market, down from the 20% figure in 2016. If the strong sales of F-Series continue over our forecast period and the company regains its lost market share, there can be a nearly 35% upside to our price estimate. Click here to view our forecast and scenarios for Ford’s market share in the trucks segment.

SUVs were the second most important segment driving Ford’s sales in September. The company registered a 9% increase in retail sales of SUVs in the month, across all its major volume players such as Escape, Edge, and Explorer.  SUV sales now represent 22% of total industry sales with mid-sized SUV sales growing. This trend is favoring Ford’s Explorer model which is popular with older millennials.

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The company’s luxury brand Lincoln saw a small increase in sales in September and the small luxury SUV brand Lincoln MKC witnessed an 8% increase in sales (year on year). Lincoln is a strong growth driver for Ford Motors as luxury brands contribute more towards the profitability of the company.  We expect the number of vehicles sold under this division to increase steadily from around $192K in 2017 to nearly $350K by the end of our forecast period. In a scenario where Ford succeeds in its luxury brand strategy and vehicles sold under this brand increase at a faster pace, there can be a nearly 20% upside to our price estimate. Click here to view our forecast and scenarios for vehicles sold by the Lincoln division.

The auto industry had a positive September, partly due to recovery post the hurricanes. The hurricane in Houston had a positive impact for Ford’s truck sales, although the company believes that less than one-third of its sales increase in September can be attributed to the recent hurricanes. For Ford Motors, its F-Series segment continues to drive sales and this is likely to remain a key growth driver for the company.

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