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Ford stock (F) fell to its 52-week low on Feb. 11 and is down more than 7% for the year. It had fallen 18% last year even as Detroit rival General Motors (GM) gained 48%. Ford shares have lost almost half of their value over the last three years, and even the generous dividends can’t cover up the capital erosion.
2025 was never expected to be an easy year for the U.S. automotive industry given the pricing pressure. However, President Donald Trump’s tariffs – levied as well as threatened – have led to “a lot of cost, and a lot of chaos” for the U.S. automotive industry according to Ford CEO Jim Farley.
In this article, we’ll discuss whether it’s time to give up on Ford stock after its frustrating underperformance. Let’s begin by looking at the company’s 2024 earnings and 2025 guidance.
Ford Provided Dismal 2025 Guidance
Ford reported record revenues of $185 billion in 2024, but its pre-tax profits of $10.2 billion were below the $10.4 billion that it reported in 2023. While Ford’s Pro commercial business continues to do well, and its adjusted earnings before interest and taxes (EBIT) rose almost 25% year-over-year to $9.01 billion last year, Ford Blue, which sells the legacy internal combustion engine (ICE) vehicles, saw an erosion in profits and the segment’s adjusted EBIT fell to $5.28 billion as compared to $7.46 billion in 2023. As for the electric vehicle (EV) segment that was rechristened Model e, the less said the better, as its adjusted EBIT loss widened to over $5 billion last year.
It was Ford’s 2025 guidance that really spooked investors. The company forecast adjusted EBIT between $7 billion to $8.5 billion for 2025 while predicting its adjusted free cash flow to be between $3.5 billion to $4.5 billion. On a segment level, it expects the adjusted EBIT for Ford Pro to be between $7.5 billion and $8.5 billion while projecting it to land between $3.5 billion and $4 billion for the Blue segment. In the EV business, Ford expects pre-tax losses to be between $5 billion and $5.5 billion.
Put differently, 2025 would mark the third consecutive year in which Ford’s earnings do not grow.
Ford’s Stock Has Been Falling Due to Tepid Earnings
While Ford has tried countering the general perception that it has hit peak profitability, the actual earnings numbers tell a different story. The company has failed to post profits above 2022 levels, in part due to higher EV losses. Although its EV losses seem to have stabilized, the company’s legacy business now faces multiple challenges. Here are some of these.
- Higher supply chain inventories are taking a toll on pricing. The pricing in the ICE market has softened, and in its 2025 guidance, Ford assumed pricing would be lower by 2%, led by price incentives amid high supply chain inventories.
- Challenge from Chinese automakers. Like other Western automakers, Ford is facing what looks like “double trouble” from China. Not only is the company battling tough competition from domestic automakers in the Chinese market where buyers are increasingly preferring local brands, but Chinese automakers are also giving foreign automakers a tough time in other markets with their competitively priced cars.
- Legacy issues. Despite Farley’s turnaround efforts, Ford hasn’t been able to address legacy issues especially related to warranties. These issues keep recurring, taking a toll on the company’s brand image as well as profitability.
- Trump’s tariffs create uncertainty. While Trump delayed the tariffs on Canada and Mexico in a big relief to both Ford and General Motors, his tariffs create a lot of uncertainty for automakers. Speaking at the Wolfe Research Investment Conference, Farley said that tariffs on Canada and Mexico will be “devastating” and “blow a hole in the U.S. industry that we’ve never seen.” Additionally, Trump has imposed a 25% tariff on U.S. steel and aluminum imports which is another headwind for the automotive industry. Trump imposed a 25% tariff on steel and a 10% tariff on aluminum imports during his first term, which Ford estimated would cost it $1 billion in profits between 2018 and 2019.
Notably, Ford’s 2025 guidance does not bake in any impact from trade actions and these measures could end up adding to its costs and thereby pulling down its profits as automotive companies might not be able to pass on the higher costs to buyers – at least in entirety given the still unsupportive macro environment.
Time to Sell Ford Stock?
After Ford’s Q4 earnings call, several analysts lowered their target price for Ford with Wells Fargo trimming it by $1 to a Street-low of $8. Ford’s mean target price of $10.44 is 13.3% higher than the Feb. 11 closing price. Sell-side analysts have been turning bearish on Ford amid its continued woes and it is rated as a “Strong Buy” by only 20% of analysts. The corresponding number three months back was nearly 29%. Similarly, the percentage of analysts rating F as a “Sell” has gone up from 14% to 25%.
It is hard to build a short-term investment case for Ford despite the company’s low valuations where it trades at mid-single digit forward price-earnings (PE) multiple. It might be prudent to stay on the sidelines for some time until tariffs settle down. While it might mean missing out on some upside, it would also mean saving your portfolio from the heightened volatility.
