Ford Set To Post All-Time Record Q3 Profit; Fiestas Selling For More Than Civics And Corollas
If you regret not buying Ford stock when it was $1, you might want to reconsider even at the current $14. Bloomberg reports that Ford may well report a record third quarter profit of some $1.37 billion, based on the projections of five analysts. Considering that the market is still depressed, some analysts see plenty of potential left on the upside, projecting a possible $20 share price within the next 12 months. The keys to Ford’s success? Here’s just one: the new Fiesta is fetching $3,000 to $4,000 above its $14k base price, because buyers are happily taking them loaded with options. The result is that average transaction prices for the Fiesta are higher than Honda Civics and Toyota Corollas. And the Fiesta is a class smaller. The small cars-can’t-be-sold-profitably-by-Detroit curse has finally been exploded.
Ford also increased market share in the Q3, 15.% from 13% two years earlier. But the critical factor is that market share gains aren’t being bought by heavy discounting or low prices. Ford’s “New Whiz Kids” have proven themselves, and then some, by steadily maximizing transaction prices through careful adjustment of features and maintaining discipline.
It (Ford) also boosted revenue per-model by cutting discounts by 23 percent since 2008, according to Autodata, a researcher based in Woodcliff Lake, New Jersey. Buyers paid an average of $30,636 (emphasis added) per model in September, up 10 percent from five years ago, Edmunds.com, a Santa Monica, California-based auto-pricing website, estimates.
“Ford was among the first to recognize that making money is more important than moving the metal,” Johnson said. “There’s now a general level of pricing discipline across Detroit, which is leading to higher average transaction prices.”
The combination of higher than market-average transaction prices, cost cutting during the recent downturn, and a successful product mix has propelled Ford’s surging profitability. Ford is also gaining market share in key import-heavy geographic area, such as the West Coast (10.8%) and Northeast (10.4%). And Ford is gaining with younger buyers, with a 12% share of the 18-24 year-old market.
Ford’s previous Q3 record profit was in 1997, at the height of the Explorer and Expedition-driven SUV boom.
More by Paul Niedermeyer
Comments
Join the conversation
Maybe TTAC will have another article later today, but if not, Ford announced some other things this morning that are newsworthy. During Q3, they paid off an additional $2 billion in debt and are scheduled to make a $3.6 billion payment to the UAW retiree trust on Friday. With that payment, Ford will have completely paid off their UAW retiree debts (on which they were paying 9% interest). This is one more step towards being a viable company in the long term. Ford also states that they anticipate ending this year with the same amount of cash as debt. This is a full year earlier than their original plan. All in all, this makes me happy for my F stock. Hope they can keep it going and start paying a dividend soon.