Ford Expects Higher U.S. Sales

Ford Motor Co. ( F - Analyst Report ) raised its 2012 sales forecast for the U.S. based on higher consumer confidence, improving employment rate and low interest rates. The company now anticipates sales between 14.5 million and 15.0 million units for the year, which is higher than 13.5 million–14.5 million units projected while releasing the fourth quarter results in January.

However, Ford expects to lose its market share in the U.S. during 2012. The automaker occupied the No.2 position in 2011 with a market share of 16.8% following General Motors Company ( GM - Analyst Report ) at 19.6%. The automaker is afraid that it would not be able to meet demand in the year due to limited production capacity.

Ford’s U.S. sales guidance is perfectly in line with the overall trend in the industry. Last month, light vehicle sales in the U.S. grew 10% to seasonally adjusted annual rate (SAAR) of 14.4 million units from the prior year, reflecting a fast recovery in the industry. According to Edmunds.com, this marks the best monthly sales in the U.S. since August 2007. We believe strong pent-up demand and improving macroeconomic conditions in the U.S. will continue to revive the industry from recessionary lows.

Ford's sales increased 5% to 223,418 vehicles during the month, driven by strong sales of Ford Focus (64.7%), Ford Edge (13.5%) and the F-Series pickup (9%). Sales of the company’s passenger cars grew 5.6%, utilities rose 3.3% and trucks increased 5.6%.

However, Ford’s European business depicts a grim outlook. While releasing the fourth quarter results, Ford projected industry volume (including medium and heavy trucks) of 14.0 million units–15.0 million units for full year 2012 in Europe. However, industry-wide sales in the region expect to reach the lower end of the forecast, according to the Chief Financial Officer of the company, Lewis Booth.

Ford expects to lose between $500 million and $600 million in 2012 in the continent owing to the ongoing debt crisis. The figure is comparable with a meager $27 million loss in 2011.

According to Mark Fields – Ford President for the Americas, the company is likely to realize a meager loss in Asia due to substantial investments in new product launches such as midsized pickup truck Ford Ranger and Ford Focus as well as for opening an assembly plant in Chongqing, China. However, Ford Asia expects to be profitable for the full year 2012.

Therefore, despite improving conditions in the U.S., we are worried about the company’s outlook in other regions in the near term. As a result, the company retains a Zacks #3 Rank on its shares, which translates to a short-term (1 to 3 months) rating of “Hold”.