Ford Earnings: Tariff Headwinds Mask Good Progress on Operating Cost Reductions

Key Morningstar Metrics for Ford Motor

• Fair Value Estimate: $16.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Ford Motor’s Earnings

Ford Motor’s F second-quarter adjusted diluted EPS of $0.37 fell 21.3% year over year on about $800 million of net tariff costs, but this beat the $0.33 LSEG consensus. Management resumed 2025 guidance after suspending it on May 5, and net tariff costs are now guided at about $2 billion, from $1.5 billion.

Why it matters: The stock fell on July 30 in after-hours trading, likely on the higher tariff impact, but costs excluding tariffs have fallen for four consecutive quarters. Ford is finding more efficient manufacturing methods and ways to reduce materials spending.

• Adding the $2.0 billion tariff impact to the new adjusted EBIT guidance of $6.5 billion-$7.5 billion is $8.5 billion-$9.5 billion, which is higher than its Feb. 5 guidance (that had no tariff impact) of $7.0 billion-$8.5 billion, and shows progress on costs.
• Adjusted free cash flow guidance is unchanged from Feb. 5 at $3.5 billion-$4.5 billion, so we see the stock falling on July 30 as shortsighted. Still, we’d like to see Ford act over the next few years to move some production out of Mexico, as GM announced in June, to reduce tariff risk.

The bottom line: We are not changing our moat rating or fair value estimate for Ford. We see the stock as undervalued, and likely staying that way while the auto industry decides how much tariffs will be passed on to consumers via the 2026 model year product and what consumer reaction will be.

• A cynic can point out that cost controls were helped by excluding a $600 million special item for a fuel injector recall, but we expect recall costs to decline long term as the company’s new manufacturing processes and preventative quality measures continue. Costs were still down with the charge.

Coming up: Ford said it is holding an EV event in Kentucky on Aug. 11. CEO Jim Farley calls the event a Model T moment. The company will talk about its plans for “breakthrough” electric vehicles in the US. The EV business has lost $2.2 billion so far in 2025, so any good news is welcome.