Lincoln brand automobiles have been undergoing a large revitalizing campaign in recent quarters which has been yielding impressive results over the last few months. While Lincoln sales slipped 0.6%, in 2013, the once popular luxury brand has seen sales accelerate at an exciting pace over the last 5 months. Almost every time an article or press release about parent company Ford's (NYSE:F) sales figures is published, there is at least a side note mentioning Lincoln's sales growth or the restoration of this forgotten brand. Let's take a slightly deeper look into the explosive growth that the investing community has witnessed and if/when it will have an effect on Ford's earnings.
|Month||Lincoln Sales Y-o-Y Change||Ford Sales Y-o-Y Change||U.S. Auto Sales Y-o-Y Change|
All sales information found on Ford.com
It's quite evident that Lincoln sales are increasing rapidly and at a much faster pace than that of Ford as a whole as well as the U.S. Auto Industry as well. January and February are what stand out most to me, not only because both months saw Y-o-Y improvements of over 35% but because these figures are for two months with horrendous weather. This weather has caused a ripple effect in several sectors including the airline, the retail, and especially the automobile industry. If this growth can be sustained will Ford's numbers soon be a result of dual-brand success? Some context is appropriate, however, as Lincoln sales in late 2012 and early 2013 (the basis for the Y-o-Y comparisons above) were very poor, inflating sales improvements.
Ford mentioned in its February sales report that it expects some of the pent-up demand resulting from poor weather conditions to carry over to March.
Small Piece of the Pie
Over the past five months, Lincoln sales have increased 26% Y-o-Y, on average. If this growth rate is expanded over the entirety of 2014, 102,935 Lincoln vehicles will be sold over in the current calendar year (81,694 vehicles sold in 2013). Given that Ford Motor sold 2,493,918 vehicles last year (Lincoln only making up a miniscule 3.28% of total vehicle sales), Lincoln still has a lot of ground to make up if it wants to have a palpable effect on the company or its bottom line.
The MKZ Mirage
The 2014 MKZ has seen unprecedented sales growth since its unveiling. The MKZ has produced a monstrous YTD Y-o-Y growth figure of 269%, contributing a large amount to the brand's YTD growth of 39.7%. In fact, large doesn't really pain the picture. Without 2014 MKZ sales, Lincoln brand sales have actually regressed 2.8% (7,438 vehicles sold through February this year as compared to 7,676 last year). While these numbers could be spun as a positive testament to the model's popularity, the sales figures of the vehicle are far too small to make a difference to a company like Ford. Sales of all Lincoln vehicles currently aren't enough to move the needle for Ford, so if this brand really is going to blossom into a materially profitable entity, this kind of growth needs to be seen across all models for at least a few years, which seems unlikely.
Lincoln Brand vs. Ford Models
To further emphasize the relative size of Lincoln sales, the following table will compare YTD and 2013 sales from the Lincoln brand compared to certain models sold under the Ford brand.
|Vehicle||2013 Sales||YTD Sales|
Now, after reviewing those figures consider that in 2013, all vehicles under the Lincoln brand sold 81,694 units and 12,634 units YTD.
While it is commendable of management and those working within the Lincoln department of Ford Motor to post such robust growth, it is irrelevant to the company's overall profits and that doesn't seem likely to change in any significant way. The point of this article is to illustrate that mentions of Lincoln sales in press releases and quarterly reports can and should be ignored. That being said I am bullish on Ford long-term; Lincoln is not only an insignificant figure when it come to earnings, but Ford has a host of other business issues that investors should focus on before even looking at Lincoln vehicle sales growth/decline/anything.
Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.