Despite reasons for Ford's latest EV sales surge, there's a lot going right at the automaker

Published Sat, May 11 20242:00 PM EDT

Lower pricing due to softening demand helped April electric vehicle sales at Ford more than double, even as the automaker was shifting resources away from the money-losing unit. Despite the reasons behind the pricing, Freedom Capital Markets auto analyst Michael Ward said Ford's nearly 130% jump in battery electric vehicle (BEV) sales last month should be viewed as a positive. "Ford has issues with pickup trucks — both BEVs and ICE [internal combustion engine] — and so, they weren't able to deliver them and some of that probably got pushed to April," Ward said. Ford slowed production on its Mustang and Lightning models earlier in the year as consumers hesitated to commit to EVs due to their higher upkeep costs and lack of charging infrastructure. Sales of EVs, which comprise the struggling Ford Model e unit, rose 86% in the first quarter as production challenges and supply issues were starting to abate. Despite the volume increases, Ford Model e saw losses widen in Q1 to $1.32 billion on just $100 million in quarterly sales. Both were worse than expected. "We learned a lot in our more expensive vehicles, Mach-E, when we dropped the price 17%, our volume went up 141%," said Ford CEO Jim Farley during last month's post-earnings conference call. "That's telling us that the more affordable we can make a great product, the more attractive it is." Ford has been a tough stock to own — showing signs of life in late 2023 and grinding higher earlier this year. Things stalled out in April's tough month for the overall market. Ford has lost 1.5% year to date — way underperforming the consumer discretionary sector and the overall S & P 500 so far in 2024. F 1Y mountain Ford 1 year Last year, Ford said it would delay or cancel $12 billion in planned spending on new EVs and shift more of its efforts toward higher-margin hybrid vehicles. Jim Cramer has been a fan of the hybrid shift. Ford's hybrid sales in April rose almost 60% to 17,997 units. While small relative to the 153,572 units of ICE vehicles sold last month, it was double the EV total of 8,019. Sales of hybrids, which together with ICE make up the Ford 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 lower than expected. "Hybrids are a good solution for a lot of people," Ward said. The hybrid F-150 pick-up, for example, provides "flexibility where you don't have to worry about the infrastructure and charging," he added. Aside from the consumer market, Ford is betting on EVs and hybrids for their compelling use cases in commercial pickup, trucks, and vans, Ward said. That's where the company's commercial Ford Pro division shines. Ford has a "competitive advantage" in commercial, Ward said, because the automaker already has the infrastructure in place. While Ford Blue still accounts for most of the revenue, Ford Pro has been catching up — delivering a better-than-expected $18 billion in sales and $3 billion in EBIT in the first quarter. Ford Pro also includes the company's software and physical services that offer sticky and recurring revenue streams at high margins. Bottom line Ford's April monthly sales figures are further evidence of a strong start to 2024, which gives investors like us confidence that management can meet the higher end of their full-year adjusted EBIT guidance range of $10 billion to $12 billion. Ford's 2024 outlook was released last month with Q1 results. The automaker also raised its adjusted free cash flow outlook for the year by $500 million to between $6.5 billion and $7.5 billion and lowered by $500 million the top-end of its capital expenditures guidance range to $9 billion. The company hopes to manage closer to the lower end at $8 billion. We're pleased to see the company's ability to adapt to changing consumer preferences by adjusting prices and production to spur and meet demand. We want management to take advantage of its low price-to-earnings multiple, which is the lowest in the S & P 500, and initiate a buyback. We believe a buyback would be a catalyst for Ford stock just like it has been for General Motors , which announced its repurchase plan back in November. (Jim Cramer's Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Ford Mustang Mach-E and F-150 Lightning on display at the New York International Auto Show on March 28, 2024.

Danielle DeVries | CNBC

Lower pricing due to softening demand helped April electric vehicle sales at Ford more than double, even as the automaker was shifting resources away from the money-losing unit.