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The Q2 earnings season hasn’t treated Detroit automakers well.
For instance, General Motors (GM) plunged over 8% yesterday, July 22, despite beating Q2 earnings estimates. The company disclosed a $1.1 billion hit from President Donald Trump’s auto tariffs in Q2 and reiterated that it expects the annual impact to be between $4 billion and $5 billion.
Stellantis (STLA) also reported its interim results earlier this week, warning of a first-half loss of nearly $2.7 billion, blaming the tariffs and one-time charges. It was quite unusual for Stellantis to report its interim results instead of the actual earnings. However, the company attributed the surprise decision to the extreme variation in its expected earnings and Street estimates, which called for a profit during the quarter.
Ford (F) is next in line to release its Q2 earnings, teed up to release its report on July 30. In this article, we’ll look at Ford’s Q2 earnings estimates and examine whether the stock could meet the same fate as rival GM following its confessional.
Ford Q2 Earnings Preview
Analysts expect Ford’s Q2 revenues to fall 2% year-over-year to $43.9 billion.
However, Ford had a strong quarter in terms of deliveries and reported a 14.2% quarterly rise in U.S. deliveries, which was around 10x the 1.4% increase in industry-wide sales. Its F-series trucks, which are believed to account for the bulk of its profitability, had their best second-quarter performance since 2019.
Meanwhile, Ford, which previously warned of a $1.5 billion net pre-tax hit from the tariffs, is expected to report earnings per share (EPS) of $0.34 in Q2 – a year-over-year fall of 27.7%.
Automakers are reeling under the impact of Trump’s tariffs, and while Ford is less exposed to these tariffs than GM, which has a much higher reliance on imports, it is also facing the heat and withdrew its annual guidance during the Q1 release.
What to Watch in Ford’s Q2 Earnings
Along with its revenue and earnings figures, I will be watching for management’s commentary on the following.
- Quality Issues: Ford has faced frequent quality and recall issues, and most recently, it recalled around 700,000 vehicles over a fuel injector issue, which would cost it around $570 million. The “legacy” issues related to warranties keep coming back to haunt Ford and take a toll on its profits. In its release following the recent recall, Ford said that “the increase in recalls reflects our intensive strategy to quickly find and fix hardware and software issues and go the extra mile to help protect customers.” During the Q2 earnings call, I will be looking for more color on the recurring recall issue that not only is damaging to the brand, but also taking a toll on profits.
- EV Business: While sales of electric vehicles (EVs) have slowed down stateside, GM remains bullish on that segment with CEO Mary Barra terming “profitable electric vehicle production” as the company’s “north star.” However, as things stand today, legacy automakers are a little too far from reaching EV profitability, and Ford warned of a pre-tax loss between $5 billion and $5.5 billion this year in the EV business. During the upcoming earnings call, I will watch out for any update on the company’s EV strategy, especially with the EV tax credits set to expire after September.
- Impact from Changes to CAFE: The One Big Beautiful Bill Act has done away with penalties on automakers not meeting the emission standards. GM said that it does not expect much impact this year, terming it a “transition year,” but said that expenses in the coming years might be lower. During Ford’s Q2 earnings, I will look out for any color on the impact from the new regulations.
Ford Stock Forecast
Sell-side analysts are not too bullish on Ford heading into the Q2 confessional, and of the 24 analysts covering the stock, only three rate it as a “Strong Buy.” 16 analysts rate the stock as a “Hold,” while the remaining five as a “Moderate Sell” or “Strong Sell.” Ford trades above its mean target price of $10.18, while the Street-high target price of $14 is 25% higher than the July 22 closing price.
Should You Buy F Stock Ahead of the Report?
I believe much of the damage has already been done when it comes to Ford, and given the strong U.S. sales in the second quarter, I won’t bet on the kind of post-earnings selloff that we saw with GM.
That said, the Jim Farley-led company has a lot more on its plate that it needs to sort out, particularly the frustrating recalls and the related costs. Overall, while I remain invested in Ford, I don’t find the current risk-reward profile attractive enough to trigger a fresh purchase given the tariff uncertainty.
On the date of publication, Mohit Oberoi had a position in: F , GM . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
