Despite reasons for its latest EV sales surge, there’s a lot going right at Ford
Lower pricing due to weak demand helped Ford more than double its electric vehicle sales in April, even as the automaker is shifting resources away from loss-making units. While there are various reasons behind the pricing, Freedom Capital Markets auto analyst Michael Ward said Ford’s nearly 130% increase in battery electric vehicle (BEV) sales last month should be viewed as a positive. “Ford is having issues with its pickup trucks — both BEVs and ICE (internal combustion engines) — so they’re not able to deliver those trucks, and some of them may be delayed until April,” Ward said. Earlier this year, Ford slowed down The Mustang and Lightning models are being produced at a pace as consumers are hesitant to buy electric vehicles due to their higher maintenance costs and lack of charging infrastructure. Sales of electric vehicles, including Ford’s beleaguered Model E unit, rose 86% in the first quarter as production challenges and supply issues began to ease. Despite the increase in sales, Ford’s Model e’s first-quarter loss widened to $1.32 billion, with quarterly sales of just $100 million. Both were worse than expected. “We learned a lot from our more expensive car, the Mach-E, and when we lowered the price 17 percent, our sales increased 141 percent,” Ford CEO Jim Farley said last month. said in a post-earnings conference call. “What this tells us is that the cheaper we make a great product, the more attractive it is.” Ford stock has been difficult to hold — showing signs of recovery in late 2023 and rising sharply earlier this year. Things came to a standstill during a difficult April for the market as a whole. Ford is down 1.5% year to date, well below the performance of the consumer discretionary industry and the S&P 500 as a whole through 2024. Shift more energy toward more profitable hybrid vehicles. Jim Cramer has always been a fan of hybrid shifting. Ford’s hybrid vehicle sales increased nearly 60% in April to 17,997 units. While smaller than the 153,572 ICE vehicles sold last month, it was double the 8,019 EV sales. Sales of hybrids (which together with ICE make up Ford’s blue division) jumped 42% in the first quarter. Ford Blue’s quarterly EBIT (earnings before interest and taxes) fell to $905 million on revenue of $21.8 billion. Both were below expectations. “Hybrids are a great solution for a lot of people,” Ward said. For example, a hybrid F-150 pickup truck offers “flexibility where you don’t have to worry about infrastructure and charging,” he added. In addition to the consumer market, Ford is betting on electric vehicles and hybrids because they have compelling use cases in commercial pickups, trucks and vans, Ward said. That’s where the company’s commercial Ford Pro division shines. Ward said Ford has a “competitive advantage” in the commercial space because the automaker already has the infrastructure in place. While Ford Blue still accounts for the majority of revenue, Ford Pro has been playing catch-up — with better-than-expected first-quarter sales of $18 billion and EBIT of $3 billion. Ford Pro also includes the company’s software and physical services, which provide high-margin sticky and recurring revenue streams. Ford’s monthly sales numbers for April were further evidence of a strong start to 2024, giving investors like us confidence that management can hit the upper end of its full-year adjusted EBIT guidance range of $10 billion to $12 billion. Ford released its first-quarter 2024 outlook last month. The automaker also raised its adjusted free cash flow outlook for the year by $500 million to a range of $6.5 billion to $7.5 billion and lowered the top end of its capital spending guidance range by $500 million to $9 billion. The company hopes to keep its target at around $8 billion. We’re pleased to see the company’s ability to adapt to changing consumer preferences by adjusting prices and production to stimulate and meet demand. We hope management will take advantage of its low P/E ratio (the lowest in the S&P 500) and initiate a buyback. We believe buybacks will be a catalyst for Ford stock, much like General Motors’ buyback program announced in November. (Jim Cramer’s Charitable Trust is Long F. For a full list of stocks, see here.) As a subscriber to Jim Cramer’s CNBC Investing Club, you’ll Receive trade alerts before Jim Cramer trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.
The Ford Mustang Mach-E and F-150 Lightning are on display at the New York International Auto Show on March 28, 2024.
Danielle DeVries | CNBC
Weak demand drives lower pricing, boosting electric vehicle sales in April Ford That number has more than doubled even as automakers are shifting resources away from loss-making units.
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