Ford stock rises as EV losses are held in check and hybrid sales surge

By Claudia Assis

Ford work trucks and vans enjoy 'white hot' demand in first quarter, CEO says

Ford Motor Co. kept losses from its EV business in check and reported a better-than-expected quarterly profit late Wednesday, thanks to its work trucks and vans.

Ford also saw its bet on hybrids pay off, with sales of hybrid vehicles up 36% in the first quarter, and Chief Executive Jim Farley said that Ford was focusing on affordable EVs.

Shares rose 2.4% in after-hours trading.

Ford expects to be able to sell a future EV between $25,000 and $30,000 at a profit. "It's a huge opportunity for Ford," the executive said on a call with analysts after the results.

Those cheaper EVs would be "great platforms for software and services" that Ford offers, he said.

That comes a day after Tesla Inc. (TSLA) said it remained committed to a "more affordable" EV, which boosted the stock despite a first-quarter earnings miss. Investors have grown concerned about a slowdown in EV demand.

In the first quarter, however, Ford relied on the more old-fashioned business of selling work pickup trucks, SUVs and delivery vans to businesses and government agencies.

Demand for work vehicles has been "white hot," and that's something the market might not be fully valuing, Farley said on the call.

Ford Pro, as the segment is called, also offers fleet services. Ford Pro is "very profitable" right now and will be "profitable and durable for many years to come. And I'm not sure the full market understands that," Farley said.

Ford (F) earned $1.3 billion, or 33 cents a share, in the first quarter, down from $1.8 billion, or 44 cents a share, in the year-ago period. Adjusted for one-time items, the company earned 49 cents a share.

Total revenue rose 3% to $42.8 billion, from $41.5 billion a year ago, including Ford Pro's revenue of $18 billion, well above Wall Street expectations of around $14 billion.

Analysts polled by FactSet expected Ford to report adjusted earnings of 43 cents a share on total revenue of $42.9 billion.

Ford offered a "solid release," but its market valuation "appears fair and top-line comps should remain difficult in the near term," CFRA analyst Garrett Nelson said in a note late Wednesday.

Ford shares also have rallied sharply in recent months, and "the stock's risk/reward [is] balanced at current levels," Nelson wrote.

See also: New-car sales expected to tick higher as inventories, and deals, are on the rise

Sales faltered for Ford's EV segment, called Model E, as EV fleet sales declined and "significant industry-wide pricing pressure continued to affect electric vehicles currently on the market," the company said in a statement.

The EV business had an EBIT loss of $1.3 billion, and costs were flat year over year, Ford said.

The carmaker said it expects its EV costs to improve going forward, "but be offset by top-line pressure."

On the call, Farley said that Ford is zeroing in on affordability, as it believes "that's where the adoption of EV will grow the fastest," Farley said.

"We are going to build a sustainably profitable EV business," one that needs to return the cost to capital "on its own," he said.

"We learned a lot when we more expensive vehicles," he said. When Ford dropped the price of its Mach-E electric SUV in February and brought it closer to the price of its competition, volume went up 141%, Farley said.

"That's telling us that the more affordable we can make a great product, the more attractive it is to these mainstream EV adopters," he said.

Ford kept its 2024 EBIT guidance unchanged, saying it was tracking to the "higher end" of its $10 billion to $12 billion range. The carmaker expects adjusted free cash flow between $6.5 billion and $7.5 billion, up from the initial outlook of between $6 billion and $7 billion.

Ford narrowed its capital expenditure range for the year to between $8 billion and $9 billion, compared with a previous expectation of $8 billion to $9.5 billion.

Ford is "scrutinizing every penny," Chief Financial Officer John Lawler said on the call. The company remains "on plan" to its projected $2 billion in cost reductions in areas like materials, freight and manufacturing.

Shares of Ford have gained 6% so far this year, mirroring the S&P 500's SPX advance.

-Claudia Assis

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04-24-24 2050ET

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