Ford's Profitability Challenges Intensify Amid Uncertain EV Transition

What happened

Ford Motor Company faces persistent profitability issues despite potential sales growth, as highlighted in recent analysis. The company's aggressive push into electric vehicles remains a key uncertainty, with the Model e segment continuing to report significant losses. Management's 2025 guidance projects adjusted EBIT of $7.0–8.5 billion and free cash flow of $3.5–4.5 billion, relying on Ford Pro and hybrid franchises for stability. However, external headwinds like potential 25% tariffs and competitive pressures in the EV market could materially compress earnings if sustained. Investors must weigh these risks against Ford's current undervaluation and strong liquidity position.

Implication

Ford's ongoing losses in the EV segment emphasize the high costs and execution risks of its transition strategy, potentially delaying profitability. The reliance on Ford Pro and hybrids provides near-term cash flow but may not fully offset the drag from Model e investments. Tariff exposures, if realized, could significantly erode earnings, necessitating vigilant tracking of trade policy developments. Adherence to 2025 guidance on EBIT and free cash flow is critical; any misses might downgrade the investment stance. Despite these challenges, the stock's apparent undervaluation and dividend support offer some downside protection, justifying a cautious approach.

Thesis delta

The news article reinforces the DeepValue report's existing cautions on profitability and EV uncertainties, highlighting that these risks are not new but remain pressing. This underscores the need for heightened vigilance on watch items like tariff outcomes and cost reduction delivery, but the core BUY thesis based on valuation and cash flow support remains unchanged.