November Auto Roundup

RJ is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

November auto sales were strong across the board, with the SAAR expected to be around 15.2 million units. Let’s take a look at performance on an individual company basis.

Ford

Best Ideas Newsletter holding Ford (NYSE: F) healthily exceeded its consensus sales growth forecast of 3.5% unit growth, with sales expanding 6.5% during November and retail sales growing 12%. Total small car units surged 76% year-over-year, making it Ford’s best November small car performance in 12 years. Utilities and trucks units lagged cars, growing 2% and 3.7%, respectively, compared to 15.2% growth in car sales total car sales.

Although performance was boosted due to sales being pulled into November as a result of Sandy, we thought the results were good, especially since the company announced it will increase US production 11% in the first quarter of 2013 versus the same period last year. The F-Series continues to steal share from other pickup truck manufacturers, as the increase in gas mileage has made the truck lineup even more appealing than smaller, less powerful options. We were also encouraged to see Mustang sales rebound, suggesting the car model may be coming back into favor after choppy results throughout much of the year.

On the downside, Lincoln continues to struggle, with sales falling 9% year-over-year to just over 5,700 units. Though the company reiterated its commitment to reviving the once-legendary brand, the increase in popularity of rivals such as BMW and Audi has made re-branding an even more challenging effort. Even as Lincoln struggles though, the rest of the company continues to perform well, so we remain confident that Ford has substantial valuation upside from current levels.

GM

General Motors’ (NYSE: GM) results weren’t as encouraging, as 3.4% year-over-year sales growth fell short of consensus expectations for unit sales. Retail sales were not very good, falling 0.1%. Buick and Cadillac continue to perform well, growing 22% and 30%, respectively, while Chevrolet sales remained flat.

Car unit sales were pretty good, though some standouts included the Volt (up 303.4%), the Corvette (up 21.2%), and the Buick Enclave (up 22.8%). However, unit sales of the Camaro dipped 12.9%, while SUV unit sales were down pretty much across the board. We expect this trend to continue as crossover and small SUV sales cannibalize sales of the more profitable likes of the Tahoe and Suburban.

Pickup sales were poor, with the Colorado diving 33% year-over-year (even without competition from the Ford Ranger), while the Silverado fell 10%. Competition from Ford and Toyota (NYSE: TM) seems to be eroding Chevrolet’s pickup market share, and we do not see the trend reversing itself in the near term. Further, days sales of inventory for trucks sits at 139—nearly double what the company is targeting. Although truck sales should see a nice bounce from the Sandy aftermath, we won’t like the profitability outlook until the company cleans up its inventory. We remain on the sidelines.

Toyota

Recently, we’ve become bigger fans of Toyota as the company continues to successfully execute its small car line-up in the US. November was no different, with unit sales surging 17.2% year-over-year. The Toyota cars division continued to be exceptionally strong, advancing 16.5% year-over-year, led by a huge surge in the Corolla (up 40%) and solid 8.5% growth in the Prius family.

Stealing share from GM, light truck sales surged 18.3% year-over-year thanks to a 31% increase in sales of the Tacoma full-sized pickup. We think the combination of superior fuel economy and US production (the Tacoma and Tundra are built in the US) has made the Tacoma an attractive alternative to Big Three pickups, though the F-series remains the strongest, in our view.

Lexus continues to stage a bit of a comeback against stiff competition from the German manufacturers, with passenger car sales jumping 18.2% and SUV sales up 15%. We’re big fans of the Lexus due to its fantastic reputation for quality and reliability. We continue to believe shares of the Japanese auto manufacturer are undervalued.

Honda

Honda (NYSE: HMC) posted a fantastic November—in fact, it was the best month in the company’s history. Sales jumped 38.9% year-over-year, driven by a 75% surge in Civic sales and 82% surge in Accord sales. Though both numbers are lapping the supply-chain disruption of the previous year, we think the numbers were solid and exhibit how the company has recaptured its momentum after redesigning its flagship models.

Acura sales expansion trailed the pace of the rest of the company, growing 23.6%. As with Toyota, the luxury brand is struggling to capture sales from Audi and BMW. We aren’t interested in shares at this time.

Volkswagen, Chrysler

The great growth story continues to be Volkswagen, as sales jumped 29.3% year-over-year. Audi sales were also strong, rising 24% year-over-year, with Volkswagen US sales exceeding 500 thousand units for the first time ever. After refocusing its efforts on making market-specific vehicles, both brands have been doing great. Chrysler sales were also fantastic in November, with sales jumping 14% and leading to the best November at the company since 2007. Fiat’s purchase of the company could end up looking like a bargain, as the brand returns to relevancy.

All things considered, we particularly liked the performance of Best Ideas portfolio holding Ford, and we remain comfortable with our current position in the firm. We retain auto exposure in the portfolio of our Dividend Growth Newsletter via wheel-maker Superior Industries.


Valuentum holds shares of Ford in its Best Ideas Newsletter, and shares of Superior Industries in its Dividend Growth Newsletter. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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