Ford Posts Earnings Beat, and Its Outlook Is Improving

Ford Motor Company has released a mixed, but mostly positive, second-quarter report that has sent its shares soaring. Ford posted adjusted earnings of $0.42 per share, comfortably ahead of Wall Street’s roughly $0.30–$0.36 estimate range depending on the source, while revenue came in at $48.3 billion, beating estimates near $45.8 billion but still down 4% year-over-year. Ford shares climbed through the day, and then continued to rise in after-hours trading.

The Headline Figures

Ford’s shares closed at $14.96, up 1.87%, before climbing another roughly 5% in after-hours trading as investors digested the results. By the following trading day, shares were changing hands in the mid-$15 range in regular trading, up nearly 20% for the year and poised for a fourth consecutive day of gains.

While Ford posted a profit beat, it came on the heels of a revenue miss, which is usually a negative for the stock. In this case, however, investors seemed to ignore the dip in revenue from a year ago and the large GAAP loss, instead fixating on the earnings beat and guidance increase. The latter, in particular, seemed to give the stock a much-needed boost. The GAAP loss, for reference, was a loss of $0.33 on a GAAP basis, driven largely by a $3.6 billion due to a non-cash charge from the unwinding of the BlueOval SK battery joint venture. The charge was viewed as a one-time accounting event and not indicative of the underlying health of the business.

Where the Gains Came From

Ford’s recovery was driven by its traditional gas and hybrid vehicles. Higher-margin SUVs like the Bronco and Explorer offset the lower sales of the F-Series pickup, which has typically been Ford’s most profitable vehicle.

A breakdown of the figures shows that:

• Ford Blue (gas and hybrid vehicles) – netted EBIT of $1.1 billion, up $474 million year-over-year on revenue of $26.1 billion;
• Ford Pro (commercial vehicles) – generated EBIT of $1.7 billion on $17.8 billion in revenue, down $600 million year-over-year due to the ongoing recovery from the aluminum supply chain issue after the fires at the supplier’s facility;
• Ford Model e (electric vehicles) – still posted an EBIT loss of $919 million, but that represented an improvement of $410 million compared to the same period last year.

Across all segments, adjusted EBIT rose 17% year-over-year to $2.5 billion, despite the overall decrease in revenue. This shows that Ford is able to control its costs and profit from higher-margin segments, which is a positive sign.

The Guidance Increase

The positive guidance update seems to be the primary catalyst for the shares’ increase. Ford raised its full-year adjusted EBIT guidance to a range of $10 billion to $11 billion, compared to a previous guidance of $8.5 billion to $10.5 billion. Furthermore, the company raised its adjusted free cash flow outlook to $6 billion to $7 billion, compared to a previous outlook of $0.36 estimate range depending on the source, while revenue came in at $0__6 billion. Its capital expenditures guidance, at $0.36 estimate range depending on the source, while revenue came in at $1__10.5 billion, was unchanged, which shows that the company is confident in its ability to deliver on its promises without having to invest heavily into its operations.

Some of the guidance updates were due to timing differences. In particular, Ford now expects to receive approximately $0.36 estimate range depending on the source, while revenue came in at $2__1.3 billion in tariff reimbursements, compared to the previous guidance of $1 billion this year and $800 million in 2027, according to the company’s CFO.

The company also mentioned that it is on track to deliver $1 billion in material and warranty cost reductions this year, which would help to offset the losses due to the ongoing product quality issues.

What Wall Street Says

The general sentiment on Wall Street was positive, with at least three analysts raising their price targets after the report, including Deutsche Bank, which increased its estimate to $0.36 estimate range depending on the source, while revenue came in at $3__15. Jefferies upgraded Ford to Buy and set a $17.50 price target, arguing that the second quarter would be the bottom for the company as capital spending and production normalize. With that said, the analyst note seems to be an outlier, as 13 analysts have a “hold” rating on the stock, while three have a “strong sell” rating on Ford, compared to only seven “strong buy” ratings. On average, analysts expect Ford to be worth roughly $15.19 per share in 12 months, which is slightly below the current price of the shares after their recent surge. In other words, the market’s enthusiasm seems to have exceeded the expectations of most Wall Street analysts.

Other Factors That Could Help Ford

There are a few other factors that could contribute to the positive momentum:

• Defense contracts – Ford is a contender in the U.S. Army’s program to produce tactical vehicles based on the F-Series Super Duty platform;
• International EV sales – the joint venture with Geely, in which Ford owns 66%, will start selling multi-energy and low-emission vehicles in Europe around 2028;
• Peer performance – General Motors raised its full-year adjusted EBIT outlook to a range of $0.36 estimate range depending on the source, while revenue came in at $4__16 billion after the company also posted a beat in the second quarter. In this light, the positive developments at Ford are seen as a sign that the industry as a whole is not as challenged as the bears have suggested in recent months.

The Takeaway

Ford’s second-quarter report provides further evidence that the company is continuing to recover from the challenges it has faced in the last several years. Despite the ongoing tariffs, losses from the EV segment, and supply chain issues, Ford is able to offset some of these headwinds with higher sales of higher-margin SUVs, as well as its cost reductions and disciplined capital spending. The guidance update, which comes on the heels of another beat, suggests that Ford management is confident that the turnaround is well underway and that the company will continue to deliver on its promises in the years to come.

While Ford’s shares surged sharply higher after the report, the mixed analyst ratings and the overall skepticism on Wall Street suggest that the bulls are still not in full control. For now, however, the trend seems to be in the right direction for Ford.