February 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.
Let’s take a look at February auto sales, which appear to have come in at a seasonally adjusted annual rate around 15.4 million units.
Valuentum Best Ideas Newsletter holding Ford (NYSE: F) posted a solid February, selling 195,822 vehicles—a 9% increase compared to the same month a year ago. We at Valuentum think the number is even more impressive considering February 2012 had fairly good weather, while February 2013 was viciously cold and snowy for much of the United States.
Strength was broad based, though utilities (up 21%) greatly outperformed both cars and trucks, which were up 6% and 4% year-over-year, respectively. Both the Edge (up 29%) and Explorer (up 59%) were hot sellers during February, possibly the result of a cold weather push, in our view, especially since gas prices have been anything but favorable in the first quarter.
In the cars segment, we saw another fantastic month from the Fusion, which saw unit sales jump 28% year-over-year, making it the best-selling Ford car. We think the wonderful Aston Martin design is appealing to a broad scope of consumers, and we’re even more bullish about Ford’s design team.
The F-Series posted yet another fantastic month, with unit sales jumping 15% year-over-year, just shy of 55,000 units. Housing continues to be an important driver for truck sales, but we also think Ford is doing a fantastic job of providing consumers with superb fuel economy thanks to its EcoBoost engines.
Lincoln was poor yet again, with sales sinking 29% to a paltry 4,883 units. We’ve essentially written Lincoln off as part of our investment thesis, so any upside here would be a surprise to us. Competitors are simply outfoxing Lincoln in the luxury space, a problem Ford is working to address. Nevertheless, we continue to love the company’s recent execution, and we believe shares offer further upside.
General Motors (NYSE: GM) posted solid growth for February, with sales 7% higher than a year ago for a total of 224,314 units. The company seems to be working through its inventory issues (see below), as its Days Supply has fallen as sales accelerate. However, we aren’t seeing the number come down on an absolute basis, so we could see the Days Supply move to the upside if the pace of sales slows (Image Source: GM February 2013 Press Release).
Across the firm’s brand portfolio, we were pretty impressed with strong sales from Buick and Cadillac, which are holding ground (if not taking some) against foreign competitors. We believe Lincoln could follow a similar path, but its products simply aren’t up to the challenge at this point.
While we believe shares of GM don’t look too expensive, we think the company’s operations are lackluster, and thus it is not our favorite way to benefit from the surge in demand for autos.
Toyota’s (NYSE: TM) February sales results were a bit underwhelming after benefiting from easy comparisons for much of 2012. Total company sales were up 4.3% year-over-year to 166,377 units, though the company emphasized that the daily sales rates were actually 8.7% higher than a year ago. Regardless, results were fairly consistent with both GM and Ford in the sense that SUVs outpaced the rest of the company, with Toyota brand SUV sales up 15% year-over-year and Lexus truck sales (essentially SUVs) also up 15% compared to the same period a year ago.
Prius and Camry sales were both down low double digits, dragging the total Toyota branded car sales down 2.8% year-over-year (though DSR was 1.3% higher). Lexus fared poorly as well, as Lexus branded car sales dipped 4%. We were a little surprised by the month posted by Toyota, but we’ll wait to see if this month is just an aberration. On an industry-wide basis, car sales, which happen to be Toyota’s sweet spot, seemed to lag the broader auto market. The firm did post solid pickup truck sales, which increased 17% during the month.
Overall, we thought February was a slightly disappointing month for Toyota, but it is just that—one month. Shares trade near the low end of our fair value range, and we believe it has an attractive valuation, but we continue to like Ford more.
Honda (NYSE: HMC) posted a relatively disappointing February sales figure, with total sales falling 2% year-over-year to 107,987 units, though its daily sales rate was up 2%. The 2013 Accord, which was refreshed for this year, posted another fantastic month, with sales jumping 35% year-over-year. However, Honda’s other two high selling cars, the Fit and Civic, saw sharp year-over-year declines, falling 11% and 16%, respectively (Image Source: Honda February 2013 Sales Release).
Not so surprisingly, truck sales were relatively strong, rising 7% at Honda and 24% at Acura. We believe that some of the weakness in the consumer space might be attributable to higher gas prices, but we also think it’s interesting to note that the product mix growth for light autos was heavily favored toward higher-priced SUVs. We doubt it’s having an enormous impact on consumer spending, but it could have some effect—especially if more consumers are saving in anticipation of purchasing a vehicle.
Honda’s February was pretty uneventful, in our view, though we are pleased to see the Accord selling so well. Shares of the OEM look fairly priced at this time.
Chrysler, Volkswagen, Hyundai, BMW, and Mercedes
We believe each of these firms had a meaningful story to tell in February. Chrysler posted a solid February, with sales up 4% year-over-year to 139,015 units, the company’s best February since before the Great Recession. We were a little surprised to see that the firm’s heavy marketing of the Ram only resulted in a 3% sales increase, though sales of the Durango, Challenger, and Avenger were excellent. Volkswagen was the US auto growth story in 2012, but we’re seeing the company encounter tough comparisons, which led to a sales increase of only 3%. Hyundai posted a record February, selling 52,311 units, up 2% from the year prior.
In the luxury space, Mercedes stole the top spot from BMW after sales jumped 22% during February. BMW’s sales increased only 0.5%, even as it benefited from a 22% increase in X5 sales. Mercedes strength was driven mostly by the C-class, leading us to believe that the A-class (which we are hesitant to call a luxury car given the price point) will be a strong performer when it hits showrooms.
Valuentum holds shares of Ford in its Best Ideas Newsletter. RJ Towner owns shares of Ford. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 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!