Ford Earnings: Costs Under Control Despite Tariff and Novelis Challenges

Key Morningstar Metrics for Ford

• Fair Value Estimate: $16
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of Ford’s Earnings

Ford’s F fourth-quarter 2025 adjusted diluted EPS of $0.13 missed the $0.19 LSEG consensus, but the stock rose slightly in after-hours trading after Ford provided strong 2026 adjusted EBIT guidance of $8 billion to $10 billion.

Why it matters: Going into earnings, 2026 guidance, and the Novelis plant fire impact on aluminum for F-Series production were two main points of concern. EBIT guidance at the midpoint is 32% higher than 2025’s $6.8 billion, and Novelis took $2 billion from 2025 EBIT, as did net tariff costs.

• The 2026 total company EBIT will be skewed toward the second half of the year once the Novelis plant resumes operations, likely between May and September. Ford is importing additional aluminum, which will add $1.5 billion-$2 billion in 2026 costs, but Novelis will take $1 billion from 2026 EBIT.
• A $1 billion reduction in materials and warranty costs, along with $1 billion less tariff impact, is expected to offset higher input costs for items such as computer memory, keeping overall costs flat versus 2025. Guidance assumes US industry sales in the high-15 million to low-16 million units.

The bottom line: We maintain our fair value estimate of $16 for no-moat Ford, and we will reassess all modeling inputs when we roll our model forward for the 10-K. We are glad to see continued progress in cost control and see potential for positive 2026 earnings surprises, provided no US recession.

• Cash outflow for EV impairments (see our Dec. 16 note) remain $5.5 billion across 2026-27. The pivot from EVs to create the Ford Energy storage business will cost $2 billion, with $1.5 billion of that in 2026. Ford has excellent auto liquidity of $49.8 billion, including $28.7 billion in cash.
• CEO Jim Farley talked about the cost benefits for Europe of partnering with VW and Renault. Recent media reports indicate that Chinese automaker Geely may be using excess Ford capacity in Spain, so we would not be surprised to see an announcement this year on more partnering.