Ford’s (NYSE:F) third quarter results beat Wall Street’s expectations by a wide margin with record revenue and better-than-feared profits reflecting improved warranty expenses and resilient demand despite higher vehicle prices.
But as Ford (NYSE:F) navigates the tariff environment and sluggish adoption of electric vehicles, a new wrinkle emerges with a disrupted aluminum supply from the Novelis fire that will likely plague Ford (NYSE:F) through 2026. The company projects a headwind of ~$1B between 2025 and 2026, resulting in a corresponding reduction in EBIT to $6.5B.
The Novelis fire figured prominently in the company’s earnings call with analysts, with CEO Jim Farley kicking off the call with “if it weren’t for the impact of the Novelis fire in Oswego, New York, our underlying performance had us on track to raise our full year EBIT guidance.”
“The Novelis issue will cause the loss of ~100K units and limit Ford’s ability to leverage mix,” said Jefferies analyst Philippe Houchois, although the impact will be blunted by tariff mitigation and lower regulatory compliance costs.
“Excluding Novelis, our underlying business continues to perform well,” CFO Sherry House said on the call, offering assurances that while mitigation efforts will result in an “oversized short-term impact on working capital,” these headwinds will reverse next year.
Agrees Seeking Alpha analyst Vladimir Dimitrov.
“While tariffs and the fire make for very interesting and dramatic headlines, long-term investors do not need to pay much attention to these issues as they are already being priced in and there’s also significant uncertainty when forecasting the overall impact of trade tensions.”
One area of concern remaining for analysts, however, are the worsening EV losses, increasing to $1.4B in Q3 from $1.3B in the previous quarter.
“Should [electrification] losses worsen, this could prove problematic,” warns RBC Capital analyst Tom Narayan, with most analysts in agreement that the company will likely announce an EV impairment cost similar to that at rival General Motors (GM).
However, Ford (F) CEO Farley is confident that the company’s strategy “plays to Ford’s strength.”
“Thankfully, our strategy plays to our strengths, iconic work vehicles, passion productions like Mustang and the off-road franchises like Bronco and Raptor. We’re also prioritizing hybrids across our lineup, including the development of extended range hybrid options,” Farley said on the call.
Farley’s assurances seem to have soothed any concerns investors may have over any potential impact from tariffs and the Novelis fire, with Ford (F) shares rallying to their highest level in 15 months with a gain of nearly 10% during Friday’s trading session.