Ford Motor (F -6.4%) shares declined after its Q4 earnings report. The company exceeded EPS expectations, but automotive revenue fell short. Ford's 2025 guidance includes an adjusted EBIT of $7.0-8.5 billion, $3.5-4.5 billion in adjusted free cash flow, and capital expenditures of $8-9 billion. Ford operates through three segments: Ford Blue (internal combustion engines and hybrids), Ford Pro (commercial fleet vehicles), and Ford Model e (electric vehicles).
- Adjusted EBIT, a crucial metric for Ford, increased 91% year-over-year to $2.1 billion in Q4. However, Ford anticipates a roughly breakeven adjusted EBIT for Q1 due to lower wholesales and an unfavorable mix. A more normalized adjusted EBIT is expected in Q2, aiming to reach its underlying EBIT level in the second half of 2025 as material cost improvements benefit the bottom line.
- The Ford Blue segment's Q4 revenue rose 4% year-over-year to $27.3 billion, with the adjusted EBIT margin improving to 5.8% from 3.1%. The ICE market has seen normalized inventories and pricing. However, Ford anticipates lower volume and an unfavorable mix due to the non-repeat of last year's stock build. Additionally, Chinese OEMs continue to expand, posing a challenge to the industry.
- Ford Pro's revenue grew 6% year-over-year to $16.2 billion, though segment EBIT decreased to 10.0% from 11.8%. The segment's fundamentals remain strong, particularly in North America and Europe. The commercial business focuses on unit sales and series mix to maximize revenue, while building recurring revenue streams through software and physical services.
- The Ford Model e segment faced challenges with an 11% year-over-year revenue decline to $1.4 billion. Despite increased competition and pricing pressure, Ford plans to significantly boost global volume in 2025, driven by European launches and increased investment in battery facilities and next-gen products. In the U.S., a sweet spot has emerged for small- and medium-sized trucks and utilities in the EV market.
- Ford addressed tariff concerns, noting that prolonged 25% tariffs from Canada and Mexico could severely impact the industry, wiping out billions in profits and affecting U.S. jobs. Tariffs would also lead to higher prices for customers.
Overall, Ford's end to 2024 was somewhat disappointing, particularly with the 2025 adjusted EBIT guidance of $7.0-8.5 billion, a significant drop from $10.2 billion in 2024. The company anticipates lower industry pricing in 2025 due to higher incentive spending. The near-term outlook is also challenging, with a breakeven adjusted EBIT expected in Q1. Investors were aware of the difficulties in 2025 but hoped for better outcomes. Concerns also arise regarding the sustainability of Ford's 6.4% dividend yield.
