Ford Stock Dropped. This Is When Recalls Matter.

A Ford Bronco Sport model. (Bill Pugliano/Getty Images)

Shares of Ford Motor fell Tuesday, despite a price target increase on Wall Street. Investors are focused on the escalating cost of recalls.

Ford stock dropped 2.9%, closing at $11.24, while the S&P 500 and Dow Jones Industrial Average gained 0.3% and 0.5%, respectively.

The drop came after the National Highway Traffic Safety Administration disclosed a new recall. Ford is fixing some model year 2021 to 2024 Bronco Sports, and model year 2020 to 2022 Escapes equipped with 1.5-liter engines. (Ford will fix some Kuga models, which are primarily sold in Europe.) A fuel injector may crack and leak fuel inside the engine compartment, creating a fire risk, according to the American recall notice, which adds that 694,271 vehicles are affected.

Typically, recalls don’t matter all that much to automotive stocks. Recalls are part of doing business and how U.S. authorities ensure cars on the roads stay safe. This, however, is the 90th recall for the company so far in 2025. What’s more, the remedy is under development, with dealers updating engine-control software as an interim fix. It’s far more common to have the permanent fix disclosed in the recall notice.

Ford didn’t respond to a request for comment about recent recalls, but Chief Operating Officer Kumar Galhotra told The Wall Street Journal recently that “The increase in recalls reflects our intensive strategy to quickly find and fix any hardware and software issues and go the extra mile to protect customers.”

Manufacturing quality has been an issue for Ford investors lately. Shares dipped 18.4% in late July 2024 after the company missed Wall Street’s second-quarter earnings expectations, partly because warranty expenses were up $800 million compared with the first quarter.

That put the quarterly warranty expense at roughly $2 billion, or 4% of sales. That’s high for a car company. Between 2011 and 2019, warranty expenses averaged about 1.6% of sales. Ford said at the time the extra costs were tied to model year 2021 vehicles and earlier.

This fuel injector recall is expected to cost the company an estimated $570 million and will hit second-quarter results. That’s in addition to other regular warranty activity. Currently, Wall Street projects second-quarter operating profit of $1.9 billion, according to FactSet.

The drop came despite Barclays analyst Dan Levy raising his price target for Ford stock to $11 from $9 on Wednesday. Price-target increases can give any stock a boost, unless something else overwhelms investors—like it did on Wednesday.

Levy rates Ford stock Hold. Overall, just 15% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for shares in the S&P 500 is about 55%. The average analyst price target for Ford stock is about $10.

Write to Al Root at allen.root@dowjones.com