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Ford Motor (F -6.4%) is trading lower today following its Q4 earnings report last night. It beat on EPS although automotive revenue was light. We also got our first look at 2025 guidance: adjusted EBIT of $7.0-8.5 bln, $3.5-4.5 bln in adjusted free cash flow, and cap-ex of $8-9 bln. Ford reports in three business segments: Ford Blue (gas and hybrid vehicles, or ICE, internal combustion engines), Ford Pro (commercial fleet vehicles) and Ford Model e (EV segment).

• Adjusted EBIT is a key metric for Ford. In Q4, it rose 91% yr/yr to $2.1 bln. However, Ford guided Q1 adjusted EBIT to be roughly breakeven due to lower wholesales and unfavorable mix, including launch activity at major US assembly plants. However, Ford expects a more normalized adjusted EBIT in Q2 with a plan to hit its underlying EBIT level in 2H25 as cost improvements tied to lower material cost start to accrue to the bottom line.
• As usual, its Ford Blue segment dominates the financials with Q4 revs up 4% yr/yr to $27.3 bln while segment adjusted EBIT margin improved to 5.8% from 3.1% a year ago. In the ICE market, the industry's inventories and pricing have normalized. Ford also sees the Chinese OEMs continue to expand and be a major force in the industry. A headwind is that Ford expects lower volume and unfavorable mix driven by the non-repeat of last year's stock build.
• Its Ford Pro segment grew 6% yr/yr to $16.2 bln but segment EBIT dipped to 10.0% from 11.8%. Ford says the fundamentals of its Pro's business are strong, especially Super Duty chassis cabs and Transit wagon in North America and the Transit family in Europe. Its commercial business is focused on unit sales and series mix to maximize revenue. Pro is also building recurring revenue streams through its software and physical services business.
• Its Ford Model e segment struggled a bit with revs down 11% yr/yr to $1.4 bln. Ford said it continues to see new EV models launch, increased competition and increased pricing pressure. While continued industry pricing pressure remains, Ford plans to materially increase global volume in 2025, driven by the full year impact of European launches, and it has significantly increased investment in its battery facilities and next-gen products, which are just two years away. A silver lining on the US EV retail side is that a sweet spot has emerged with small- and medium-sized trucks and utilities.
• Ford also touched on the tariffs issue during the call. It said that if 25% tariffs from Canada and Mexico are protracted, that would have a huge impact on the industry with billions of dollars of industry profits wiped out and adverse effect on the US jobs. Tariffs would also mean higher prices for customers.

Overall, this was a bit of a disappointing end to 2024. We think the top line was a letdown, but even more so was the adjusted EBIT guidance for 2025 at $7.0-8.5 bln, that is a pretty big drop from $10.2 bln in 2024. Ford is planning for lower industry pricing of roughly 2% in 2025, driven by higher incentive spending. Also, the near term outlook is not great either with breakeven adjusted EBIT expected in Q1. Investors knew 2025 would be difficult, but were likely hoping for more. We also wonder if Ford's frothy 6.4% dividend yield could be at risk.