Ford Motor Stock Rises After Earnings, But Momentum May Not Last

Key Points

• Ford Motor reported better-than-expected earnings, with revenue of $40.66 billion and EPS of 12 cents, but faces resistance near its 2025 high.
• The company anticipates a $2.5 billion impact from tariffs in 2025, expecting to offset $1 billion through internal measures, leaving a $1.5 billion hit to earnings.
• Ford's uncertain short-term future is reflected in the lack of forward guidance, and complicated by a potential rise in vehicle prices, and the possibility of dividend cuts.

Ford Motor NYSE: F reported earnings after the market closed on May 5. The automaker’s report was better than expected, and the stock jumped nearly 3% the day after the report. The company beat on the top and bottom line with revenue of $40.66 billion, topping the forecast for $35.99 billion. Earnings per share of 12 cents beat analysts’ forecasts of negative 2 cents.

But this is likely a case of a company clearing a low bar. The real test will come as Ford stock is likely to face resistance near its 2025 high.

As expected, tariffs played a key role in Ford’s earnings call. Automotive stocks are in sharp focus as carmakers are on the front lines of the tariff uncertainty. Although the industry is still waiting for the other shoe to drop as it relates to tariffs, the impacts are already being felt. Here are some things to know before you buy Ford stock.

There Are Worse Houses in This Neighborhood, But What Does That Mean?

The full impact of the Trump administration’s tariff policies is yet to be felt. However, at the moment, all automakers are dealing with 25% tariffs on imported vehicles and auto parts. Ford says it will be less impacted because it produces 80% of the vehicles it sells to U.S. customers at American assembly plants.

But less impacted doesn’t mean unimpacted. Even though Ford makes a high percentage of its parts in the United States, it still must import parts. Furthermore, many of the company’s most affordable vehicles, such as its Bronco Sport SUV and Maverick compact pickup truck, are assembled in Mexico.

With that in mind, management says it expects a $2.5 billion tariff impact in 2025 but plans to offset $1 billion through internal measures, including cost reductions and logistical adjustments. That leaves a $1.5 billion hit to the company’s 2025 earnings before interest and taxes (EBIT).

Perhaps of greater concern is that Ford did not issue forward guidance. That wasn’t unexpected, but it confirms the company’s own uncertainty, which will only add to investor anxiety.

Ford May Have Said the Quiet Part Out Loud

The $1.5 billion tariff expense also does not reflect the fact that prices for many Ford vehicles will be on the rise. Many analysts expect that it will curtail consumer interest in buying new cars.

That's why it’s important to note what chief executive officer (CEO) Jim Farley said in an interview with CNBC the morning after the earnings report. Farley remarked that 84-month auto loans were “perfectly rational.”

In the past, many consumers were loath to take out a 60-month loan. Today, 72-month loans (six years) are normal, particularly for consumers with fair or poor credit. Extending the length of an auto loan would be one way for consumers to “absorb” the higher cost of new vehicles. In fact, it may be the only way some consumers would be able to obtain approval. 

That may not be a wise personal financial decision. But if Farley is correct that tariffs could raise the cost of imported vehicles by up to $5,000 per vehicle, consumers will be left with a difficult choice.

To make that choice a little easier, Ford announced in early April that consumers can get employee pricing through June 2, 2025. That will mean vehicles will be available at below invoice prices.

If You Buy F Stock, Expect Volatility

Even if investors get more clarity on tariffs, it’s going to be a rough year to own auto stocks. Ford does, perhaps, offer investors less tariff exposure, but that’s about the extent of the good news. Analyst sentiment is mixed since earnings, but the consensus price target of $9.87 would be 5.5% lower than the stock’s closing price on May 6.

The company’s first quarter suggests that many consumers front-loaded their purchase decisions relative to new vehicles. That means the first quarter is likely to be the high point in terms of revenue. Those sales still left the company’s revenue 4.9% lower on a year-over-year basis.

The company's dividend complicates investors' buying decisions. Currently, investors get a 5.74% yield and an annual payout per share of 60 cents. However, with earnings under pressure, it wouldn’t be unthinkable that the company could cut its dividend, particularly as it’s still paying the United Auto Workers (UAW) $8.8 billion through 2028. At the time the deal was signed, Farley said the costs were unsustainable and could make the company a bankruptcy risk.