Should You Avoid Ford Stock After Wall Street Cuts Earnings View?

Core Viewpoint - Ford's fourth-quarter 2024 earnings exceeded estimates, but the stock has declined due to weak guidance and ongoing challenges in the electric vehicle (EV) sector [1][20]. Financial Performance - Ford's EPS and revenues rose year over year, but the stock has lost approximately 19% in 2024, contrasting with a 19% growth in the industry [3][20]. - The Zacks Consensus Estimate for 2025 and 2026 EPS has decreased by 5 cents and 3 cents, respectively, indicating bearish sentiment among analysts [2]. Segment Analysis - The Ford Pro unit showed resilience, with revenues increasing by 15% to $67 billion in 2024, and EBIT rising from $7.2 billion to $9 billion, achieving a margin of 13.5% [5][6]. - The demand for Super Duty trucks and Transit vans remains strong, with software subscriptions growing by 27% year over year to nearly 650,000 [6]. - The Model e segment, focused on EVs, reported a loss of $5.07 billion in 2024, widening from $4.7 billion in 2023, with a projected loss of $5-5.5 billion for the current year [11][12]. Cost Management - Ford has reduced net costs by $500 million in the second half of 2024 and identified $1 billion in product design cost reductions for 2025 [9]. - Despite these efforts, the overall profitability outlook remains muted, with expected adjusted EBIT for 2025 ranging from $7 billion to $8.5 billion, down from $10.2 billion in 2024 [15]. Market Position and Challenges - Ford's dividend yield exceeds 6%, with a commitment to distribute 40-50% of free cash flow, providing some buffer against stock volatility [7]. - The Ford Blue division anticipates a decline in EBIT from $5.3 billion in 2024 to between $3.5 billion and $4 billion in 2025 due to lower sales of internal combustion engine (ICE) vehicles [13]. - The company faces potential risks from trade policies, particularly the possibility of tariffs on imports from Mexico and Canada, which could increase costs and disrupt supply chains [17]. Future Outlook - The first quarter of 2025 is expected to be particularly challenging, with adjusted EBIT projected to be breakeven, a significant drop from previous quarters [14]. - The overall guidance for 2025 indicates a decline in automotive sales and EPS by 2% and 12%, respectively, year over year [21].