Joe Hinrichs, Ford Motor Co.’s president of the Americas, announces May 2, 2013 that the company is adding 2,000 workers to its Claycomo, Mo., plant, where the the F-150 pickup is made, because of surging U.S. demand for pickup trucks.DAVID EULITT/The Associated Press
The famous Ford pickup truck is carrying a full load these days – not of bricks or lumber, but of good economic news.
Sales of Ford Motor Co.'s F-150 have a strong tendency to rise and fall with small business and construction activity, including home building.
Truck sales were battered during the financial crisis and Great Recession, but they have since made a remarkable comeback that is pointing to good days ahead for the U.S. economy.
Ford's U.S. truck sales in June rose nearly 24 per cent over last year, to 68,000.
That's the highest level since 2005, when the U.S. housing sector was humming and the unemployment rate was just 5 per cent and heading lower.
And last month was no aberration. Ford's pickup sales rose nearly 22 per cent in the first six months of 2013 over the first half of last year, to 367,000. That's the highest level since 2006, according to Bespoke Investment Group.
The surge in truck sales suggests an important part of the U.S. economy has made a full recovery, despite only lukewarm improvements in a number of broader economic figures, including employment gains and the jobless rate.
The contractors and home builders who are buying F-150s are feeling optimistic about what the next year will hold, and believe the U.S. housing recovery is here to stay.
A rising tide of pickup purchases is one excellent reason to feel upbeat about the future – even if a stronger U.S. economy means the Federal Reserve will wind down its bond-buying stimulus program over the next 12 months, as it warned last month after its policy meeting, sending markets into turmoil.
The question for investors is whether the good days ahead are already built into Ford's share price.
The automaker's stock hit a fresh 52-week high on Tuesday, adding to an 11-fold increase from the 2008 low, when General Motors went under and investors feared the worst for Ford as well.
Skeptics might see the spectacular rebound in the share price as a reason to bail out of the stock, or at least avoid it. After all, if Ford's truck sales have made a full recovery, how much upside is left?
However, Ford is more than just pickup trucks. While its F-series pickups dominate the sector, out-muscling General Motors Co. and Chrysler Group LLC, they accounted for less than a third of the company's overall sales of cars and light trucks in June.
Ford's other vehicles are also sending out strong, positive economic signals. The company's overall U.S. sales rose 13 per cent in June, topping analysts' estimates and leading the monthly sales growth figures for its North American auto manufacturing rivals, as well as Toyota Motor Corp. and Honda Motor Co.
That is translating into a bigger market share for Ford. GM outsold Ford by nearly 30,000 vehicles in June, but saw its sales growth trail Ford's, with an increase of just 6.5 per cent during the month.
Ford is even finding traction with its small cars and hybrid vehicles – long seen as the domain of Japanese manufacturers, especially Toyota – where sales rose an impressive 39 per cent over last year.
By many yardsticks, Ford's share price isn't yet reflecting these impressive numbers. Despite an 80 per cent gain in the share price over the past 11 months, the shares trade at just 10.5 times trailing earnings.
That suggests there is plenty of upside ahead if the U.S. economy continues to recover – and by the look of Ford's pickup truck sales, it will.
David Berman