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Investing.com --Bernstein downgraded Ford Motor Co (NYSE:F) to “Underperform” from “Market Perform” and slashed its price target to $7 from $9.40, warning that newly implemented U.S. vehicle tariffs and weakening consumer sentiment pose a significant threat to earnings and free cash flow over the next two years.
Shares are down roughly 3% in premarket trading.
Ford’s adjusted earnings are expected to fall 41.2% in 2025 and 36.4% in 2026, with free cash flow projection lowered by more than 35%.
Combined tariff and consumer headwinds will erase $6.7 billion in automotive free cash flow from 2025 to 2027.
Vehicle tariffs have commenced, and parts tariffs are likely to follow within a month. The market has yet to fully price in the downside risk.
U.S. has imposed a 25% tariff on imported vehicles, with additional tariffs on automotive parts set to take effect on May 3.
While vehicles compliant with the U.S.-Mexico-Canada Agreement (USMCA) can deduct U.S. content from their tariff obligation, Bernstein noted that the precise definition of “U.S. content” remains unsettled, creating uncertainty.
A stricter interpretation could more than double Ford’s exposure to tariffs, according to the firm.
The combination of tariff costs, price elasticity, and macroeconomic pressures is expected to result in a $4.8 billion EBIT headwind for Ford in 2026.
While Ford is arguably better positioned than GM due to a smaller portfolio cut and a stronger Pro segment, it starts from a weaker financial base, Bernstein said, citing higher exposure to parts produced in Mexico and Canada.
The firm forecasts a $2.2 billion annual free cash flow hit for Ford between 2025 and 2027, compared to $2 billion for GM.
Despite lowering near-term estimates, Bernstein maintained that long-term prospects tied to Ford Model e, its Pro commercial division, and EV battery localization efforts remain intact. However, those tailwinds are unlikely to offset the near-term damage.
The firm applies a 5.6x multiple, above the market average of 4.4x, to reflect potential long-term recovery, but warns that in the near term, "it’s hard to see a path out of this.”