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Stock Analyst Update

Good Numbers U.S. Automakers

We remain concerned about possible tariffs on imported vehicles, but for now, the U.S. auto industry looks healthy to us.

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Automakers reported June 2018 U.S. light-vehicle sales that got help from an extra selling day this June. The seasonally adjusted annualized selling rate came in at 17.47 million, compared with 16.72 million in June 2017. Total sales came in at 1.55 million, a 5.2% increase from June 2017; however, we calculate a 1.3% rise after adjusting for the extra selling day. We think the industry had a good month and the trend toward light trucks over cars continues. Ford's U.S. sales head Mark LaNeve said on the July 3 Ford call there is no sign of stabilization in the industry's car mix, which for total U.S. industry sales has been in the low-30% range this year.

The first-half 2018 results have the industry up 1.9%, but we calculate 0.6% growth after adjusting for two extra selling days so far. The full year will have one extra selling day. We remain concerned about possible tariffs on imported vehicles, but for now, the U.S. auto industry looks healthy to us. The mix shift to light trucks, especially crossovers, should help profits and the U.S. unemployment situation remains bright with the number of people unemployed having declined year over year for all but one month (Sept. 2016) starting in June 2010.

 GM (GM) only reports quarterly results and its new crossovers helped its second-quarter sales rise year over year by 4.6%. There were an equal number of selling days (77) in both years' second quarter. The new crossovers helped GM post record second-quarter average transaction prices of $35,500, up about $300 year over year, and Chevrolet posted record crossover volume for both the quarter and the first half of the year. Cadillac's sales rose 3% for the quarter and for the first half of 2018, the brand posted record crossover sales. The XT5 rose 4.3% in the quarter, and the all-new XT4 comes out this fall. Cadillac will launch other new models such as a new generation Escalade and more crossovers, likely called XT3 and XT6, about every six months through 2021.

 Ford's (F) June sales rose 1.2% year over year, but we calculate a 2.6% decline adjusting for the extra selling day. Retail channel sales grew 2.9%, and truck and SUV sales grew 3.2% and 8.9% respectively. Car models fell by 14%, but retail car sales were about flat while fleet channel fell 42% due to rental sales timing. The F-Series pickup grew volume by 1.7% in June and is up 4.1% for the first half of 2018. Management said the truck's current pace would break the full-year record set in 2004 of 939,511. We await the new generation Edge crossover this fall, and Lincoln's MKC and Navigator offset a 27% fall in Lincoln's car sales. Navigator rose by 68% and is seeing a $27,000 increase in pricing thanks to 80% of its retail sales coming from the two highest trim lines.

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David Whiston does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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