Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

F-150 Sales Power Ford Motor Company (F) Past Estimates

Ford Motor Company (NYSE:F)‘s U.S. sales were up 13% in June, thanks to very strong pickup sales – and to sales of smaller cars and SUVs, an area that has become a surprising source of strength for the Blue Oval.

Ford’s results beat the analyst consensus estimate of 12%, according to Bloomberg. And digging into the numbers, it’s looking like the economic factors driving Ford Motor Company (NYSE:F)’s recent sales increases will continue to drive gains for a while longer.

That’s good news for Ford’s profits. Here’s why.

Ford Motor Company (NYSE:F)

Why small cars now mean big profits for Ford
Ford Motor Company (NYSE:F) sales analyst Erich Merkle said on Tuesday that a couple of key economic factors are driving sales trends in the industry that happen to benefit Ford in particular. First, consumers making new-vehicle purchases are choosing smaller cars and SUVs. Many are replacing vehicle that were bought several years ago, when fuel prices were lower – and that means that overall demand for smaller and more fuel-efficient vehicles is up.

That helps Ford Motor Company (NYSE:F), because the company has placed a big emphasis on becoming more and more competitive in those parts of the market. Products like the Escape SUV, the Focus, and the Fiesta all include high-tech features that were traditionally the kinds of things found mainly in larger and more luxurious offerings – things like high-tech “infotainment” and navigation systems, as well as luxury features like heated seats.

As a group, sales of Ford Motor Company (NYSE:F)’s small cars (the Focus, Fiesta, and C-Max hybrid) were up 39% over last June’s totals, and the Escape posted its best monthly sales total ever.

High-tech features and thoughtful touches have made Ford’s Escape a big hit. Photo credit: Ford Motor Company (NYSE:F).

For consumers who are – for instance – looking to trade in a big SUV they bought in 2005 for something more fuel efficient, the luxury-like features in an Escape help them feel like they’re not stepping down in terms of driving experience. Ford Motor Company (NYSE:F)’s emphasis on premium interiors and high-tech features makes products like the Escape and the Focus feel more luxurious than some of their competitors, and that gives Ford an incremental advantage with those kinds of buyers.

That emphasis has also helped boost Ford’s profits. Premium features help Ford command higher prices, and options like the MyFord Touch system and deluxe interior features are high-margin items that add extra profits to those sales. That’s one big part of how Ford has managed to raise its profit margins in North America to well over 10%, among the highest in the business.

Here’s another big part: pickup sales.

Pickups are big business, and they’re booming
Sales of full-sized pickups have been very strong in recent months, well ahead of the overall vehicle market. Merkle attributes that to upswings in new-home construction and in the energy sector. Both industries include many businesses that buy pickups for commercial use, and both are taking advantage of stronger business conditions to replace pickup fleets that in many cases have become quite old.

Ford’s top-of-the-line F-150 Limited is a very luxurious – and very  profitable – truck. Photo credit: Ford Motor Co.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.