A Hidden Gem in the Automotive Industry: Ford Pro Takes Center Stage
When it comes to Ford Motor Company, investors often focus on its impressive dividend yield, struggles in the electric vehicle market, and dominance in the SUV and truck segments. However, there’s a lesser-known aspect of the company that’s quietly driving growth and profits: Ford Pro.
Ford Pro, the commercial vehicle division, has been posting remarkable results, with earnings before interest and taxes (EBIT) reaching $5.6 billion in the first half of 2024. This surpasses the $2 billion EBIT of Ford’s traditional business, Ford Blue, and dwarfs the $2.5 billion loss of its electric vehicle division, model e.
What’s more, Ford Pro is growing at an impressive rate, with revenue increasing by 21% in the first half of 2024, despite only a 12% increase in wholesales. This pricing power is a stark contrast to Ford Blue, which saw a 3% revenue decline on a 4% decline in wholesales.
Ford Pro’s EBIT margins are also staggering, reaching 15.9% in the first half of 2024, a 290-basis-point improvement year over year. The company’s subscription service, which offers high-margin software and mobile repair orders, saw a 35% increase in subscriptions and a doubling of fulfilled orders in the second quarter.
As Ford Pro continues to boom, management has adjusted plans to add 100,000-unit capacity to its Ontario, Canada, plant to produce more Super Duty trucks. The company has also upped its guidance for Ford Pro’s full-year EBIT to $9 billion to $10 billion, driven by organic growth, pricing power, and favorable product mix.
While investors may focus on Ford’s dividend yield or profitable SUVs and trucks, it would be a mistake to overlook Ford Pro, which is quickly becoming the company’s cash cow. As the subscription service and repair services expand, Ford Pro’s margins may move even higher, generating more high-margin revenue.
Before investing in Ford Motor Company, consider the potential of Ford Pro and its impact on the company’s future growth and profits.
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