After Earnings, Is Ford Stock a Buy, a Sell, or Fairly Valued?

Ford Motor released its second-quarter earnings report on July 28. Here’s Morningstar’s take on Ford’s earnings and stock.

Key Morningstar Metrics for Ford Motor

• Fair Value Estimate
  : $19.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

What We Thought of Ford Motor’s Q2 Earnings

Ford stock rose sharply after the automaker’s second-quarter adjusted diluted earnings per share of $0.42 beat the $0.35 LSEG consensus. The firm also raised 2026 guidance to adjusted EBIT of $10 billion-$11 billion from $8.5 billion-$10.5 billion and raised free cash flow guidance.

Why it matters: The guidance increase comes from volume, mix, and pricing that were better than expected. We’ve found Ford’s pricing expectation the past couple of years to be conservative, given that Americans continue to buy lucrative light-truck models and off-road and performance trims.

• Volume will receive a boost in the second half from a ramp-up in the F-Series as Novelis aluminum supply increases and Ford adds 100,000 units of Canadian Super Duty capacity. Still, guidance implies lower second-half adjusted EBIT versus the first half’s $6 billion.
• Improved F-Series volume will battle several cost headwinds in the second half, including unfavorable commodities, investments in Ford Energy and the universal electric vehicle platform, and launch costs for the new Super Duty capacity.

The bottom line: We are maintaining our $19 fair value estimate for no-moat Ford. We believe the company has finally reached an inflection point on cost control and quality. The 2026 JD Power US Initial Quality Study ranking Ford as the highest mass-market brand supports this view.

• We have not felt this optimistic about Ford’s progress in years. The company has new verticals developing in energy storage, with 20 gigawatt-hours of capacity online by late 2027, and software services such as BlueCruise could add 50 basis points of EBIT margin annually in the future per Ford.
• We see potential for shares to trade well into the $20s if the market gets more optimistic on Ford’s prospects, but P/E multiple expansion for Detroit automakers is rare. Automotive cash and securities of $22.1 billion bring downside protection from a US recession.
• With its 4-star rating, we believe Ford stock is moderately undervalued compared with our long-term fair value estimate of $19.

The following are excerpts from Morningstar’s company report on Ford Motor.

Fair Value Estimate for Ford Motor

In June, we increased our fair value estimate from $18 per share after adding the new Ford Energy battery storage business to our model starting in late 2027. We assume meaningful Ford Energy revenue starting in 2028 at $1.6 billion and then sales growing to about $5 billion in 2030. Ford’s 2025 results suggest to us that Ford may have finally figured out how to meaningfully reduce its cost base, excluding tariffs, with a $1.5 billion reduction in 2025 and another $1 billion expected in 2026.

We think buying Ford’s stock requires investor patience for management to restructure the Ford Blue segment while scaling up, and now restructuring, the Ford Model e electric vehicle business while scaling Ford Energy. Without meaningful EV sales volume to scale expenses, EV battery cost improvements won’t be drastically visible via profit for a while. Our fair value estimate could change dramatically, given the extreme sensitivity of our discounted cash flow model to inputs such as North American light-vehicle sales, midcycle margins, and a weighted average cost of capital of about 10%.

Read more about Ford Motor’s fair value estimate.

Economic Moat Rating

Ford does not have a moat, and we do not expect that to change, as there are too many obstacles to overcome at once. Vehicle manufacturing is a capital-intensive business, but barriers to entry are not as high as in the past. The industry is already highly competitive, so it is nearly impossible for any one firm to gain a durable advantage over another. Foreign automakers from China may soon enter developed markets such as the US, as they already have in Europe, and South Korea’s Hyundai and Kia as well as Tesla have become formidable competitors.

Furthermore, the auto industry is so cyclical that in bad times even the best automakers cannot avoid large declines in return on invested capital and profit. Cost-cutting helps ease the pain, but it does not restore all lost profit. Consumers also have no switching costs when they want to buy their next vehicle.

Read more about Ford Motor’s economic moat.

Financial Strength

Year-end 2025 global pension underfunding totaled about $192 million, compared with about $8.2 billion at year-end 2015, while salaried-employee retiree healthcare adds another $4.4 billion shortfall. Nearly all underfunding is from pay-as-you-go plans (mostly from Germany and US senior management plans) that are always unfunded and pay benefits paid from general corporate cash. Management often guides funded plan contributions to be limited to annual service costs.

2026 funded plan contributions are projected at about $550 million, plus about $400 million in benefit payments for unfunded plans. Unfunded plan benefit payments will likely be around $400 million annually, in our view. Comments at analyst days indicate that share repurchases are possible but will probably be done only to offset dilution from stock options

Read more about Ford Motor’s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for Ford is High. The firm has spent tens of billions since 2022, betting consumers would switch to electric vehicles, but much of that capital was wasted once adoption proved too slow following regulatory changes in the US. The company operates in a highly cyclical industry, and uncertainty remains about the timing and magnitude of demand recovery following COVID-19. Macroeconomic conditions, rising interest rates, commodity prices, and trade agreement and tariff changes in key markets, such as the US, Europe, and China, can quickly derail management’s own plans and guidance, while significant disruption is on the horizon as vehicles become more high-tech and autonomous.

We are concerned about a long strike in May 2028 because the UAW wants to resume pensions and retiree healthcare for all its workers, which we don’t see as affordable. One of the largest environmental, social, and governance risks we see with Ford is increasing regulatory scrutiny of combustion vehicles, but electric vehicles like the Mach-E and the now-discontinued F-150 Lightning show Ford is serious about switching away from combustion. The US regulatory environment is also less severe than it had been.

Ford’s Class A shares are available to any investor, and each share equals one vote. The Ford family always has 40% voting power through ownership of Class B shares. We prefer to see one share class, but the family’s high ownership aligns its interests with those of outside shareholders and gives the company incentive to keep paying the dividend and special dividends.

Read more about Ford Motor’s risk and uncertainty.

F Bulls Say

• Ford’s turnaround will take lots of time due to many restructuring projects around the world, but partnerships like Renault may help share cost burdens, and Model e is guided to be profitable in 2029.
• Ford is focusing its investments where it gets the best return, which is why mostly exiting North American car segments and production in South America was the right move, in our opinion.
• Software and data services for fleet customers are a new and lucrative margin stream for Ford compared with just selling the vehicle.

F Bears Say

• The auto industry is very cyclical, and at times Detroit automakers have been losing significant US market share to foreign automakers for years. Competition has never been fiercer.
• Long-term profitability could be hindered by unions, which have recently become more powerful. Major nonunionized import automakers in the US mostly do not have this problem for now.
• Ford’s stock can sell off heavily on macroeconomic fears, even if the company itself is doing well. Furthermore, it takes significant investment to fund growth in the auto industry, which limits potential margin expansion.

This article was compiled by Irza Waraich.