The Silver Lining in Ford's Messy Q2 Earnings

Key Points

• The U.S. automaker was set up for a strong sales quarter due to promotions.

• Tariffs negatively impacted second-quarter results to the tune of $800 million.

• However, management believes it's about to have another "Model T moment."

• 10 stocks we like better than Ford Motor Company ›

It turns out the tariff development might get worse before it gets better.

That's likely what Ford Motor Company (NYSE: F) investors are thinking after tariffs, as well as recall costs, derailed what was set up to be an excellent quarter for the Detroit automaker after it drove plenty of sales demand through employee pricing and other promotions. Although the company is making more vehicles in the U.S. than its domestic counterparts, tariff costs still checked in higher than anticipated.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Here's what investors need to know from Ford's second quarter, a silver lining for investors, and even bonus news for those hoping to see a breakthrough in electric vehicles (EVs).

Starting from the top

While Ford's second quarter left many investors wanting more, the automaker did beat Wall Street estimates on the top and bottom lines. Automotive revenue checked in at $46.94 billion, topping the $43.21 billion consensus estimate per LSEG. Adjusted earnings per share checked in at $0.37, compared to the $0.33 per share expected.

Despite the company beating estimates, investors were left with the reality that automakers face an uncertain near term with tariffs and EV policy. Ford's profit this year is likely to post a sharp drop even with management working diligently to offset as much tariff impact as possible -- which Ford estimates now will cost it roughly $2 billion in 2025, $500 million more than originally anticipated. Ford incurred $800 million in tariff costs during the second quarter alone.

Ford also reinstated its guidance with a more gloomy tone. The new guidance for adjusted earnings before interest and taxes (EBIT) is between $6.5 billion and $7.5 billion, lower than previous guidance that called for between $7 billion to $8.5 billion. That wouldn't be the last gloomy note for investors, however.

Recall costs strike again

Ford has gained a bit of a reputation for recalls in recent years, and on some occasions such as the second quarter it's hurt the bottom-line net profits. Ford took a $570 million charge during the second quarter because of a fuel leak recall that impacted roughly 700,000 vehicles. That charge didn't impact adjusted earnings, but did contribute to Ford's second-quarter net loss.

Worse yet, the difference in the volume of recalls is staggering, with Ford having 94 recalls so far this year, compared to Stellantis in second place with only 21 recalls, per the NHTSA. "We are not satisfied with the current level of recalls or the number of vehicles impacted. We are working to reduce the cost of these recalls," Chief Operating Officer Kumar Galhotra said on a call with analysts.

Ford's F-150 Lightning. Image source: Ford Motor Company.

The silver lining

There's still one part of Ford that's booming currently, and that's the Ford Pro division, responsible for the company's commercial business. It generated $2.3 billion EBIT during the second quarter with a 12.3% margin on $18.8 billion in revenue. For comparison, Ford's traditional vehicle selling business, Ford Blue, generated a more modest $661 million in EBIT at a 2.6% EBIT margin on $25.8 billion in revenue. That's just to give investors an idea of how strong a business Ford Pro is currently.

Part of Ford Pro's higher-margin business is driven by software and physical services, which contributed about 17% of Ford Pro's EBIT, and will likely grow as vehicles become more software defined. Also during the second quarter, Ford Pro paid subscriptions jumped 24% compared to the prior year to 757,000.

What's next?

Investors do have one major event to look forward to, and that comes on Aug. 11 when CEO Jim Farley is promising a "Model T moment" for the Detroit icon. The automaker's hopes will be pinned on a group of next-generation, low-cost models, developed by a special team based in California.

But largely what should have been a great quarter for the company was overshadowed by a spike in recall costs and more tariff impact than initially anticipated. Ford will have to continue attempting to control what it can, especially when it comes to the volume and costs of recalls. Ford desperately needs to turn around its volume of recalls and vehicle quality for investors to jump on board this automaker.

Should you invest $1,000 in Ford Motor Company right now?

Before you buy stock in Ford Motor Company, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ford Motor Company wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,544!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,099,758!*

Now, it’s worth noting Stock Advisor’s total average return is 1,046% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.