ii view: Ford parks guidance given tariff uncertainty

First-quarter results to 31 March

• Revenue down 5% to $40.7 billion
• Net income or profit of $0.5 billion, down from a profit of $1.3 billion
• Earnings per share (EPS) of 14 US cents, down from 49 cents 
• Quarterly dividend of 15 cents per share, unchanged from previous quarter

Chief executive Jim Farley said:

“We are strengthening our underlying business with significantly better quality and our third 
straight quarter of year-over-year cost improvement, excluding the impact of tariffs.” 

“Ford Pro, our largest competitive advantage, is off to a strong start to the year, gaining market share in the most profitable U.S. and European customer segments.”   

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ii round-up:

Auto giant Ford Motor Co (NYSE:F) offered no sales or profit estimates for the 2025 full year given uncertainty around trade tariffs introduced by Donald Trump at the start of April. 

The maker of cars and commercial vehicles does however estimate a tariff related hit to annual profit of around $2.5 billion, falling to $1.5 billion following management action to both raise vehicle sale prices and increase cost saving initiatives. First-quarter revenue fell 5% from a year ago to $40.7 billion, fuelling adjusted earnings per share of 14 US cents which compares with 49 cents a year ago. Analysts had expected earnings as low as 2 cents per share. 

Shares in the S&P 500 company fell 1% in post results trading having come into this latest news down by almost a fifth over the last year. That’s better than a one-quarter fall for strike hit European rival Volkswagen AG (XETRA:VOW) but in contrast to a 52% gain for all-electric vehicle maker Tesla Inc (NASDAQ:TSLA). The S&P 500 index itself is up 9% over that time. 

Ford operates across the three core divisions of Ford Pro providing commercial vehicles, Ford Blue, offering combustible and hybrid vehicles, and Ford e making all electric vehicles.  

Ford Pro revenues fell 16% from Q1 2024 to $15.2 billion, with adjusted profit more than halving to $1.3 billion, although with accompanying management outlook comments pointing towards a good start to the year for the commercial vehicle business. 

Ford Blue revenue slipped 3% to $21 billion while revenues for the ‘e’ division soared to $1.2 billion from $0.1 billion a year ago, reducing the divisional loss to $0.85 billion from $1.3 billion in Q1 2024.   

Ford highlighted factors including the potential for industry-wide supply chain disruption as well as retaliatory tariffs in its gross estimate of a $2.5 billion trade related hit to annual profits. That was, however, less than the potential $5 billion estimate from US rival General Motors Co (NYSE:GM) recently. 

Removing the significant uncertainty caused by trade tariffs, Ford estimated underlying full-year 2025 profit would be between $7 billion and $8.5 billion versus $10.2 billion in 2024.  

Second-quarter results are likely to be announced late July to early August. 

ii view:

Founded in 1903, Ford today employs around 170,000 people. Headquartered in Dearborn, Michigan, combustible and hybrid vehicles under Ford Blue generated its biggest slice of sales in 2024 at 64%. That was followed by commercial vehicles at 29%, Ford finance or credit at 5% and all electric vehicles under the ‘e’ division at 2%. Geographically, the US remained its biggest market in 2024 at just over two-thirds of sales, with Canada, the UK and Mexico other important countries.    

For investors, the uncertainty now raised by US and other country tariffs cannot be overlooked. Losses for the ‘e’ division persist. Heightened borrowing costs are likely hindering some buyers using finance, while operational execution has by management’s own prior admission previously fallen short of requirements. 

On the upside, the automaker’s focus on reducing costs is ongoing. In 2024, Ford’s F-Series pick-up truck remained the USA’s best-selling truck for the 48th consecutive year. Revenue at the group’s electric vehicle business are increasing, while an estimated price-to-net asset value of around 0.9 times is considerably below rivals like Tesla, suggesting possible value. 

For now, a high focus on reducing costs and a forecast dividend yield in the region of 6% are likely to keep investors interested.

Positives

• Action to restructure the business taken
• Attractive dividend yield (not guaranteed)

Negatives

• Trade tariff uncertainties
• Previous operational challenges

The average rating of stock market analysts:

Hold