Despite solid recovery in U.S. auto sales, Ford Motor Company (NYSE:F) stock hasn’t really gained much appeal. In the past 12 months, Ford stock has slipped nearly 15%.
Value can be hard to find in the stock market these days. But this time, you just might find it in the company that makes your pickup truck.
Ford Stock: Reclaim the Top Seller Title in America
Ford had a great year in 2015: the company generated a record pre-tax profit of $10.8 billion, its European segment turned profitable, and Ford’s global market share edged up 20 basis points to 7.3%. (Source: “2015 Full Year and Fourth Quarter Financial Results,” Ford Motor Company, January 28, 2016.)
Ford’s solid performance is continuing well into 2016. In the U.S., the company sold over 254,000 vehicles in March. Not only was that number eight percent higher year-over-year, but also marked its highest March sales in the U.S. in ten years. (Source: “Ford Posts Best March U.S. Sales in 10 Years, Best First Quarter Results Since 2006”, Ford Motor Company, April 1, 2016.)
The best part is that Ford also outsold General Motors Company (NYSE:GM) last month. In fact, Ford became the top-selling automaker in the U.S. for the first time in five years. (Source: “Chevrolet and GMC Make GM the Hottest Retail Automaker in the Industry,” General Motors Company, April 1, 2016.)
The key to Ford’s recent success was the strategy of focusing on fleet sales. Fleet sales are typically less profitable than retail car sales. But when you sell a lot, they can be worthwhile. In March, Ford’s fleet sales surged 39%, while the same segment at GM slipped 13%.
And let’s not forget that Ford also makes the “F-Series” pickup truck—the best-selling vehicle in America for decades. In March alone, the company sold more than 73,000 F-Series trucks, marking the vehicle’s best March performance since 2006.
Of course, Ford’s solid performance also benefited from the healthy recovery of U.S. auto sales. In 2015, U.S. auto sales reached a record of 17.47 million vehicles, breaking the previous record of 17.41 million vehicles in 2000. (Source: “U.S. Auto Sales in 2015 Set Record After Strong December,” Reuters, January 5, 2016.)
Another Industry Downturn?
Now that U.S. carmakers are doing much better than before, there are still investors worried about the possibility of another industry downturn. What if this was the peak for the auto industry?
Well, according to Ford, the company would still be fine.
Last month, Ford’s chief financial officer, Bob Shanks, said that even if U.S. auto sales drop by 30% in one year, it could still remain profitable. (Source: “Ford Says It Could Make Money If U.S. Auto Sales Fell 30%,” Bloomberg, March 22, 2016.)
How? Ford is “a much different company” compared to what it was several years ago. In particular, it can now act nimble. In the case of such an industry downturn, the company would be able to cut its costs by $3.0 billion in the first year.
The Bottom Line on Ford Stock
No doubt, things have been going nicely in the U.S. auto industry so far. But it’s always nice to know that a company can survive a potential market downturn. Don’t forget, Ford was the only one of the “Big Three” that survived the Great Recession without any government help.
The bottom line: if you are bullish on the auto industry in the U.S., Ford stock could be your best bet.