$ AAPL

$ ABBV

$ ABNB

$ ACGL

$ ADI

$ ADM

$ ADP

$ ADSK

$ AEE

$ AEP

$ AES

$ AFL

$ AIG

$ AIZ

$ AJG

$ AKAM

$ ALB

$ ALGN

$ ALL

$ AMAT

$ AMCR

$ AMD

$ AME

$ AMGN

$ AMP

$ AMT

$ AMZN

$ ANET

$ AOS

$ APA

$ APD

$ APO

$ APTV

$ ARE

$ ATO

$ AVB

$ AWK

$ AXON

$ BA

$ BALL

$ BAX

$ BBY

$ BDX

$ BEN

$ BG

$ BIIB

$ BKNG

$ BLDR

$ BMY

$ BR

$ BRO

$ BXP

$ CAG

$ CAH

$ CARR

$ CAT

$ CBOE

$ CBRE

$ CCL

$ CDNS

$ CDW

$ CEG

$ CF

$ CHD

$ CHRW

$ CI

$ CINF

$ CL

$ CLX

$ CMCSA

$ CMG

$ CMI

$ CMS

$ COIN

$ COO

$ COP

$ COR

$ CPAY

$ CPT

$ CRL

$ CRWD

$ CSCO

$ CTRA

$ CTSH

$ CTVA

$ CVS

$ CVX

$ CZR

$ DAL

$ DASH

$ DAY

$ DD

$ DDOG

$ DE

$ DELL

$ DG

$ DGX

$ DIS

$ DOC

Ford's Q2 2025 saw strong U.S. sales and market share gains, but profitability was hit by tariffs, recalls, and rising labor costs, raising concerns about persistent margin pressure.

# Ford Motor Company Q2 2025: Strong U.S. Volumes Offset by Margin Compression and Tariff Headwinds

---

## Executive Summary

- **Ford Motor Company delivered a robust Q2 2025 top-line performance**, with revenue of **$50.2B (+5% YoY)**, driven by a **14.2% YoY surge in U.S. vehicle sales** to 612,095 units—far outpacing industry expectations. However, **GAAP EPS turned slightly negative at –$0.01** (down from $0.46 YoY), and adjusted EPS fell to $0.37, reflecting significant cost pressures.
- **Earnings quality was impacted by one-off items**, including large-scale recalls (850,000 vehicles) and tariff-related charges, which weighed on margins and overshadowed otherwise strong operational execution.
- **Management struck a cautiously optimistic tone**, highlighting market share gains and strong U.S. demand, but acknowledged persistent margin headwinds from tariffs, recalls, and labor cost increases. Guidance for FY25 was reinstated, with a realistic outlook that factors in ongoing cost challenges.
- **Key risks remain underappreciated by the market**, particularly the duration and impact of margin compression from tariffs (now in the 15–55% range) and recall-related expenses. The loss of EV credits and intensifying competition also pose structural challenges.
- **Catalyst watch:** Near-term, investors should monitor further tariff developments, recall resolution progress, and updates on Ford’s hybrid/affordable EV strategy. The next major catalyst will be Q3 2025 results and any regulatory changes impacting tariffs or EV incentives.

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise | YoY Change |
|-----------------------|------------|-----------|----------|------------|
| Revenue               | $50.2B     | $48.9B    | +$1.3B   | +5%        |
| GAAP EPS              | –$0.01     | $0.32     | –$0.33   | –$0.47     |
| Adjusted EPS          | $0.37      | $0.39     | –$0.02   | –$0.10     |
| U.S. Vehicle Sales    | 612,095    | 536,000   | +76,095  | +14.2%     |
| Adjusted EBIT Margin  | 4.3%       | 5.0%      | –0.7ppt  | –1.5ppt    |
| Ford Blue Margin      | 2.6%       | —         | —        | –1.8ppt    |
| Ford Pro Margin       | 12.3%      | —         | —        | –2.7ppt    |
| Model e Margin        | –56.4%     | —         | —        | +43ppt     |
| Market Share (U.S.)   | 14.3%      | —         | —        | +0.8ppt    |

---

## Earnings Quality

- **Revenue growth was volume-driven**, with U.S. sales up 14.2% YoY, but **pricing remained flat** and mix was neutral, indicating that top-line gains were not margin-accretive.
- **Margins compressed across core segments**: Ford Blue and Ford Pro both saw significant declines, while Model e’s margin improved but remains deeply negative.
- **Cost structure was pressured by $800M in new tariffs, recall expenses, and higher labor costs** from converting temporary workers to full-time. These factors more than offset the benefits of higher volumes, leading to a divergence between sales growth and profitability.

---

## Management Commentary & Guidance

- **Management’s tone was cautiously optimistic**: upbeat on U.S. sales and market share, but defensive on margin and cost headwinds.
- **Guidance for FY25**: Adjusted EBIT of **$6.5B–$7.5B**, adjusted free cash flow of **$3.5B–$4.5B**, and capex near **$9B**. Management emphasized ongoing cost control, capital reallocation to Ford Pro and hybrid/affordable EVs, and a focus on operational discipline amid external headwinds.

---

## Key Risks

- **Tariff inflation**: New tariffs (15–55%) are adding significant cost, with further escalation possible depending on trade policy.
- **Recall and quality costs**: 850,000 vehicles recalled in Q2, with potential for further quality-related expenses.
- **Labor cost inflation**: Conversion of temporary workers to full-time is structurally raising the cost base.
- **Regulatory and competitive risks**: Loss of EV credits, aggressive competition from both legacy and new entrants, and evolving regulatory landscape.

---

## Expected Market Reaction

- **Analyst sentiment is neutral to cautiously optimistic**: While the strong U.S. sales beat is likely to support the stock, persistent margin and cost headwinds may cap upside. Volatility is expected as the market digests the mixed quality of earnings and ongoing external risks.

---

## Final Takeaway

- **Q2 2025 was a strong quarter for Ford in terms of volume and market share, but fragile on profitability and cost control.** The market may be underestimating the persistence of margin compression from tariffs and recalls, while overvaluing the sustainability of recent sales momentum.
- **Upcoming catalysts**: Watch for Q3 2025 results, further tariff/regulatory developments, and updates on Ford’s hybrid/affordable EV rollout. Resolution of recall issues and progress on cost containment will be critical for restoring margin confidence.

Ford (F): Margin Headwinds Despite Strong U.S. Sales

Ford’s Q2 2024 outlook is mixed, with strong EV growth offset by legacy segment declines and margin compression, but improved operating cash flow offers near-term resilience amid ongoing uncertainty.

# Ford Motor Company: Navigating Volatility, Unlocking EV Upside – Q2 2024 Earnings Outlook

## Executive Summary

We maintain a **Neutral** outlook on Ford Motor Company ($F) for the upcoming quarter, as the company faces a complex mix of operational resilience and external headwinds. **Q1 2024 revenue of $40.7B** marked a sequential decline, but the **Ford Model e segment’s 967% YoY revenue surge** signals early traction in EVs that could surprise to the upside if momentum persists. However, **legacy segments (Ford Blue and Ford Pro) saw volume declines of –3% and –16% YoY**, respectively, and management’s suspension of full-year guidance underscores ongoing uncertainty. The market may be underestimating **Ford’s improved operating cash flow ($3.7B in Q1, up from $1.4B)**, which provides a near-term liquidity buffer even as free cash flow remains negative.

## Recent Trends Signal What’s Next

Ford’s last two quarters highlight a **mixed revenue trajectory and margin compression**. Q1 2024 revenue of **$40.7B** was down ~5% YoY, with **gross margin at 5.9%** and **adjusted EBIT margin at 2.5%**—both trending lower. The **Ford Model e segment’s explosive growth (+967% YoY)** is offset by persistent declines in Ford Blue and Ford Pro. Notably, **operating cash flow improved to $3.7B** (from $1.4B in Q4 2023), suggesting underlying operational discipline.

### Key Financial Trends Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q2 2023      | 44.9         | 7.2              | 4.1                  | 2.8           | 0.36    |
| Q3 2023      | 43.8         | 6.8              | 3.7                  | 2.5           | 0.32    |
| Q4 2023      | 42.4         | 6.1              | 3.0                  | 2.1           | 0.21    |
| Q1 2024      | 40.7         | 5.9              | 2.5                  | 1.7           | 0.12    |

**Trend:** Revenue and margins have declined sequentially, with EPS compressing from $0.36 to $0.12 over the last four quarters.

## Management’s Forward Tone and Positioning

Management’s recent communications have shifted from confidence to caution. In the Q1 2024 call, Ford executives stated, **“We are navigating a period of uncertainty and volatility, particularly around tariffs and supply chain reliability.”** This contrasts with Q4 2023’s more optimistic tone: **“We remain resilient and well-positioned for growth.”** The decision to **suspend detailed full-year guidance** and highlight “policy volatility” signals a more defensive posture. However, management continues to emphasize cost control and operational discipline, noting, **“Our underlying business, excluding tariffs, is on track.”** This nuanced messaging suggests Ford is bracing for external shocks while focusing on internal execution.

## KPI Trends & Upcoming Quarter Drivers

The most relevant KPIs for the next quarter are **wholesale unit volumes, Ford Pro paid subscriptions, and Model e order growth**.

- **Wholesale Units:** Down **7% YoY** in Q1 2024, with Ford Blue and Ford Pro both negative, but Model e up **213% YoY**.
- **Ford Pro Paid Subscriptions:** Up **4% QoQ**; ARPU up **40% YoY**.
- **Operating Cash Flow:** Improved to **$3.7B** (from $1.4B), despite negative free cash flow.

### KPI Movement Table

| KPI                        | Q1 2023 | Q4 2023 | Q1 2024 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Wholesale Units (M)        | 1.12    | 1.08    | 1.04    | –7%        | –4%        |
| Model e Orders (K)         | 12      | 28      | 38      | +213%      | +36%       |
| Ford Pro Subscriptions (K) | 320     | 410     | 427     | +33%       | +4%        |
| Operating Cash Flow ($B)   | 1.4     | 1.4     | 3.7     | +164%      | +164%      |

**Implication:** Model e and Ford Pro subscriptions are the primary growth levers, but overall volume weakness in legacy segments will likely cap near-term revenue upside.

## Missed by the Street

A key overlooked signal is **Ford’s operating cash flow resilience**. While consensus is fixated on revenue and margin compression, the **$2.3B sequential improvement in operating cash flow** (Q1 2024 vs. Q4 2023) reflects effective working capital management. As noted in the Q1 call: **“Improved working capital timing has supported our liquidity position.”** This could provide a buffer against near-term shocks, a nuance not fully reflected in current market sentiment.

## Scenarios for the Upcoming Quarter

### Bull / Base / Bear Case Table

| Scenario | Revenue ($B) | EPS ($) | Operating Margin (%) | Key Assumptions                                              |
|----------|--------------|---------|----------------------|--------------------------------------------------------------|
| Bull     | 41.5         | 0.15    | 3.0                  | EV ramp accelerates, tariff impact moderates, cost gains     |
| Base     | 40.7         | 0.12    | 2.5                  | Current trends persist, steady subscription growth            |
| Bear     | 39.5         | 0.05    | 1.8                  | Tariff pressures worsen, supply chain delays persist          |

**Most Likely Scenario:** The **Base case** is most probable, given management’s cautious tone, ongoing volume headwinds in legacy segments, and only gradual improvement in EV and subscription metrics.

## Appendix – Data Tables & Management Quotes

### Quarterly Financials Table

| Quarter      | Revenue ($B) | EPS ($) | Gross Margin (%) | Operating Margin (%) |
|--------------|--------------|---------|------------------|----------------------|
| Q2 2023      | 44.9         | 0.36    | 7.2              | 4.1                  |
| Q3 2023      | 43.8         | 0.32    | 6.8              | 3.7                  |
| Q4 2023      | 42.4         | 0.21    | 6.1              | 3.0                  |
| Q1 2024      | 40.7         | 0.12    | 5.9              | 2.5                  |

### KPI Movement Table

| KPI                        | Q1 2023 | Q4 2023 | Q1 2024 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Wholesale Units (M)        | 1.12    | 1.08    | 1.04    | –7%        | –4%        |
| Model e Orders (K)         | 12      | 28      | 38      | +213%      | +36%       |
| Ford Pro Subscriptions (K) | 320     | 410     | 427     | +33%       | +4%        |
| Operating Cash Flow ($B)   | 1.4     | 1.4     | 3.7     | +164%      | +164%      |

### Key Management Quotes

1. **“We are navigating a period of uncertainty and volatility, particularly around tariffs and supply chain reliability.”**  
   *Q1 2024 Earnings Call*  
   *Signals heightened external risk and a more defensive outlook.*

2. **“Our underlying business, excluding tariffs, is on track.”**  
   *Q1 2024 Earnings Call*  
   *Implies core operations are stable, but externalities are the main concern.*

3. **“Improved working capital timing has supported our liquidity position.”**  
   *Q1 2024 Earnings Call*  
   *Highlights a positive, underappreciated cash flow dynamic.*

4. **“We have suspended detailed full-year guidance due to policy volatility.”**  
   *Q1 2024 10-Q Filing*  
   *Reflects management’s uncertainty and risk aversion.*

5. **“Ford Pro’s paid subscriptions grew 4% sequentially, with ARPU up 40% YoY.”**  
   *Q1 2024 Earnings Call*  
   *Points to a bright spot in recurring revenue and margin support.*

6. **“We are seeing early signs of normalization in demand for Model e.”**  
   *Q1 2024 Earnings Call*  
   *Suggests potential for further EV segment upside.*

7. **“Legacy segment volumes remain under pressure, and we are adjusting production accordingly.”**  
   *Q1 2024 Earnings Call*  
   *Indicates ongoing challenges in traditional business lines.*

---

**Bottom Line:** Ford’s Q2 2024 results will hinge on the balance between EV/subscription growth and legacy segment headwinds, with external risks (tariffs, supply chain) likely to cap upside. The company’s improved cash flow management is a subtle but important buffer for near-term volatility.

Ford (F): EV Growth vs. Legacy Headwinds - Q2 2024