Bernstein has recently downgraded Ford Motor Co (NYSE: F) from “Market Perform” to “Underperform” and slashed its price target from $9.40 to $7. The research firm warns that newly implemented U.S. vehicle tariffs and weakening consumer sentiment are set to heavily impact Ford’s earnings and free cash flow over the next two years.
Key Concerns for Ford
Earnings and Free Cash Flow Projections:Bernstein forecasts that Ford’s adjusted earnings are expected to decline by 41.2% in 2025 and 36.4% in 2026. In addition, the free cash flow is projected to drop by more than 35%, with tariff-related and consumer headwinds erasing approximately $6.7 billion in automotive free cash flow from 2025 through 2027.
Tariff Burden:The U.S. has imposed a 25% tariff on imported vehicles, and additional tariffs on automotive parts are slated to take effect on May 3. Although vehicles compliant with the U.S.-Mexico-Canada Agreement (USMCA) can deduct U.S. content from their tariff calculations, Bernstein points out that the definition of “U.S. content” remains unsettled. A stricter interpretation could more than double Ford’s exposure to tariffs.
Earnings Impact:The combined impact of the new tariff costs, higher price elasticity, and existing macroeconomic pressures is predicted to impose an approximate $4.8 billion EBIT headwind for Ford in 2026. Although Ford may have a narrower portfolio cut and a stronger performance in its professional segment compared to General Motors, it starts from a weaker financial base—especially due to its higher exposure to parts manufactured in Mexico and Canada.
Free Cash Flow Forecast:Bernstein’s conservative outlook estimates a $2.2 billion annual free cash flow hit for Ford from 2025 through 2027, slightly higher than the $2 billion forecasted for General Motors, reflecting greater tariff exposure.
Investor Implications
These developments underscore significant short-term headwinds for Ford as tariffs add substantial cost pressures amidst a backdrop of weak consumer sentiment. The potential ripple effects on operating margins and overall profitability are concerning for investors, particularly given the elevated starting valuations in the automotive sector.
For those interested in a more granular analysis of Ford’s revenue streams by segment—and to understand how tariff pressures may affect specific product lines—you can refer to detailed financial breakdowns via the Revenue Product Segmentation API. This resource offers comprehensive insights into how different areas of the business contribute to overall revenue, helping investors assess potential impacts more accurately.
Bernstein’s downgrade of Ford highlights the looming challenges in the auto industry, where heightened tariffs and softening consumer demand threaten long-term profitability. As these pressures mount, investors should be vigilant in monitoring the evolving financial performance of automotive companies and consider diversification strategies to mitigate sector-specific risks.
