This commentary originally appeared on Real Money Pro on April 1. Click here to learn about this dynamic market information service for active traders.
Friday morning, Ford Motor (F) reported an 8% increase in March sales. This number, although impressive, failed to meet analyst expectations of more than 9%. Since Ford's vehicles have different profit margins, it's important for investors to examine specific brands before drawing extreme conclusions. It's also important to look at trends so that investors can determine how Ford's U.S. sales have performed over time.
Ford's near 255,000 units sold in the month of March is the highest monthly U.S. sales mark since I began tracking this data in January 2013. Considering that May tends to be the strongest month for U.S. sales, this is impressive. If current economic conditions continue, Ford's second-quarter outlook could potentially be more impressive than the first quarter.
An examination of Ford's groups can help determine how profitable the company is going to be in the first quarter. While Ford car sales actually declined 1%, year to year, in March, trucks, utility vehicles, and the Lincoln brand each saw greater-than-10% sales growth. This is significant as the car segments have less profitability than the larger vehicles.
By looking at some of Ford's more popular brands, the sales pattern mentioned above continues. While the Focus saw a year-over-year decrease of nearly 10% in March, the F-Series had nearly an identical percentage increase. This is a tradeoff I will accept as an investor as the Focus is a much less profitable brand than the F-Series. Explorer and Escape sales also showed solid growth to help carry Ford's utilities group.
Overall, I believe Ford is poised to post solid earnings per share in the first quarter. With consumers trading out of smaller vehicles and into larger ones, Ford's revenue and profit will both benefit. Analysts are expecting 44 cents per share in the first quarter, but I believe Ford will do 47 cents per share.
This provides potential investors with the perfect entry point courtesy of Friday's pullback.