F Stock Analysis: Why Ford’s EV Problems Aren’t a Deal-Breaker

Stocks to buy

Here’s an inspiring rising-from-the-ashes stock pick for you. Last year, Ford Motor (NYSE:F) was reeling from the effects of the United Auto Workers (UAW) strike. Now, in 2024, Ford appears to be staging a major comeback and Ford Motor stock looks poised for gains throughout the year.

Plus, Ford isn’t too richly valued and the company offers a great dividend. Sure, Ford does have a problem in one key area. Trust me – I won’t just gloss over that. The big picture remains bullish, though, so let’s dive into Ford’s challenges and opportunities right now.

Looking at Ford’s Weakest Area: EVs

Not long ago, Ford published its first-quarter 2024 results. Without a doubt, investors wanted to see how Ford’s post-UAW-strike recovery was panning out.

As we’ll see, Ford generally did well in Q1. There was a major pain point, though. CNN jumped right on it, declaring in a large-font headline, “Ford just reported a massive loss on every electric vehicle it sold.”

That’s undeniably true. Ford’s EV business, known as Model e, posted an earnings loss of $1.3 billion in 2024’s first quarter. This, according to CNN, equates to “$132,000 for each of the 10,000 vehicles it sold in the first three months of the year.”

Should this be a deal-breaker for investors, though? Not really, as Ford’s EV division lost $1.6 billion in the 2023’s fourth quarter. Therefore, in dollar terms at least, Ford is improving in this area.

Generally speaking, Ford’s long-term shareholders will just have to accept Ford’s EV-market losses for a while. Ford expects its EV segment to lose $5 billion to $5.5 billion this year. The automotive industry’s EV transition is underway, and Ford has to accept some short-term pain for long-term gains.

Ford’s Commercial Business Is Strong

Ford’s management is fully aware, no doubt, of the automaker’s ongoing EV-market issues. Indeed, CEO Jim Farley acknowledged that EV-related problems are creating a “huge drag not just on Ford, but on our whole industry.”

Fortunately, Ford is making up for this with strong commercial business. Ford’s commercial division, known as Ford Pro, posted a Q1-2024 operating profit of $3 billion. That’s a huge improvement when compared to Ford Pro’s operating profit of $1.8 billion in the prior quarter and $1.4 billion the year-earlier quarter.

Morgan Stanley analyst Adam Jonas quipped, “Pro pays Ford’s electric bill.” In other words, Ford Pro’s gains offset Ford’s EV-segment losses.

In any case, Ford did well in Q1 of 2024 with earnings of 49 cents per share. Wall Street had only expected Ford to earn 43 cents per share. So, it’s fair to say that weakness in the Model e segment isn’t causing unmanageable problems for Ford.

Ford Stock: Buy Now, Reivnest Dividends All Year Long

Ford’s earnings beat should convince the worry warts to stay invested despite the Model e division losses. Besides, there’s a wealth-building opportunity as Ford pays a forward annual dividend yield that exceeds 4%.

It may take a while for Ford’s EV division to turn a profit, but what’s your big hurry? You can just buy Ford stock and reinvest the dividends every three months. That way, you can leverage the compounding effect, all while investing in an American industrial icon.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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