September 4, 2012
Today the "Big Three" U.S. automakers released their August sales figures—and the results may surprise you. Despite the fact that consumers are still skittish about the larger economy, each of these three companies posted robust sales growth for the month of August. It has been some time since I have revisited the U.S. auto industry, so let's dig into the details and see whether there are any profit opportunities to be had from this newfound sales growth.
First up, Ford Motor Co. (F) reported a 13% jump in August sales compared with a year ago; this topped analyst expectations of a 9.8% rise. In July, Ford had posted a 3.8% drop in U.S. sales. Last month's growth was driven by a 28% surge in sport utility vehicle sales, particularly its Ford Escape and Ford Explorer models. At the same time, Ford reported growing demand for its more fuel-efficient models in response to rising gasoline prices. As you can see on its Portfolio Grader stock report page, F is currently a D-rated sell, but I will keep tabs on analyst activity in the next few weeks to see if the analyst community upwardly revises its estimates for Ford's quarterly sales and earnings. The Street view currently calls for just 0.4% sales growth and a 14.7% drop in earnings. So I don't recommend that you jump on the Ford bandwagon just yet—buying pressure for this stock is still quite low, making this stock more trouble than it is worth at the moment.
Ford's largest competitor General Motors Co. (GM) announced that its U.S. auto sales advanced 10% over August 2011, making last month the company's best month in terms of retail. General Motors' Chevrolet brand did particularly well, with the Equinox, Sonic and Volt fueling a 25% jump in sales. But like Ford, General Motors Co. (GM) is also a D-rated sell due to lackluster buying pressure. And analysts are even more downbeat about General Motors' top- and bottom-line this quarter—forecasts call for a 2.5% drop in sales and a whopping 41.7% drop in earnings!
Finally, Chrysler Group LLC also announced a 14% year-over-year jump in August sales thanks to robust demand for the Fiat brand. This is the 29th consecutive month that the company has posted year-over-year sales growth. On top of this, the company revealed that August sales of the 2013 Dodge Dart surged 300% compared with July. Chrysler is the one Big Three company that is not listed in my Portfolio Grader tool, and that's because it is owned in part by Italian manufacturer Fiat.
There's no doubt that August was a good month for U.S. automakers: Overall, new car sales in the U.S. are forecast to advance 20% compared with August 2011 and 12% compared with the prior month. But I recommend that you give these companies a bit more time before making any new buys. If you're really itching to get into the automobile industry, there is strength to be had among the recreational vehicle segment. In particular, my Portfolio Grader tool has isolated three recreational vehicle companies that are going strong in terms of buying pressure and fundamentals; click here to see them.