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

Ford Motor F released its first-quarter earnings report on May 5. Here’s Morningstar’s take on Ford’s earnings and stock.

Key Morningstar Metrics for Ford Motor

• Fair Value Estimate: $16.00
• Morningstar Rating: ★★★★
• Economic Moat: None
• Morningstar Uncertainty Rating: High

What We Thought of Ford Motor‘s Q1 Earnings

Ford Motor’s F stock fell over 2% during May 5 after-hours trading after reporting first-quarter adjusted diluted EPS of $0.14, down 71% year over year but ahead of the $0.02 LSEG consensus. Ford also suspended all guidance due to uncertainties over tariffs and US tax and emission policies.

Why it matters: We see Ford pulling its guidance while GM gave new guidance including tariffs on May 1 as the reason the stock was down after hours. We are surprised Ford did not match GM’s messaging by updating guidance, but the current tariff policy environment is highly uncertain.

• Even though Ford suspended guidance, it did say it expects 2025 gross tariff costs of $2.5 billion and adjusted EBIT down $1.5 billion net of cost mitigation efforts, such as using bonded freight carriers to ship vehicles and parts to Canada from Mexico.
• Like GM, Ford sees improved industry pricing for 2025, now flat for the full year instead of down about 2%, thanks to a 1%-1.5% rise in the second half of 2025 due to tariffs. CEO Jim Farley, however, stressed Ford will remain aggressive on its pricing, such as offering employee pricing.

The bottom line: Our fair value estimate of $16 per share and no-moat rating are unchanged, but we revise our 2025 adjusted EBIT forecast to about $6 billion, down from $7.5 billion in our Feb. 10 model that had no tariff impact. We model about $3.8 billion less EBIT over our forecast period.

• It is encouraging to hear Ford say that, excluding tariff costs, year-over-year expenses fell for the third straight quarter and that 2025 warranty expenses are better than budgeted so far. We think profits will eventually improve at Ford when expense control is mastered, but that is a ways off.
• Despite the guidance suspension, we don’t believe Ford’s quarterly dividend is in danger from tariff damage. About $27 billion in automotive cash and securities plus $45.3 billion of liquidity with credit lines, in our view, should preserve the nearly $2.4 billion annual payout.

Fair Value Estimate for Ford Motor

With its 4-star rating, we believe Ford’s stock is undervalued compared with our long-term fair value estimate of $16 per share. We have revised our 2025 adjusted EBIT forecast to about $6 billion, down from $7.5 billion in our Feb. 10 model, which had no tariff impact. We model about $3.8 billion less adjusted EBIT over our five year explicit forecast period versus our Feb. 10 model, with nearly all that amount in 2025-27. Average EBIT margin excluding equity income is now 40 basis points lower at 3.3% due to 25% US imported vehicle tariff headwinds. Our midcycle margin for this metric is about 5%.

We think buying Ford’s stock requires investor patience for management to restructure the Ford Blue segment while scaling up the Ford Model e electric vehicle business. The Model e segment lost $5.1 billion in 2024 and 2025 losses will likely exceed $5 billion. We expect difficult years in 2025 and 2026 for the Model e segment due to the launch of the new generation EV pickup not coming until sometime in 2027 in the BlueOval City plant under construction in Tennessee. We believe Ford will improve its EV battery costs between 2025 and 2027 but without meaningful sales volume to scale expenses, improvements won’t be drastically visible via profit for a few more years.

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 deal with at once. Vehicle manufacturing is a very capital-intensive business, but barriers to entry are not as high as in the past. The industry is already full of strong competition, so it is nearly impossible for one firm to gain a durable advantage over another. Foreign automakers from China may soon enter the US, as they already have in Europe, and South Korea’s Hyundai and Kia as well as Tesla have become formidable competitors.

Nascent EV makers such as Rivian and Lucid could also be a formidable threat one day. 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 does not restore all lost profit.

Read more about Ford Motor’s economic moat.

Financial Strength

Year-end 2024 global pension underfunding totaled about $547 million compared with about $8.2 billion at year-end 2015, while salaried employee retiree healthcare adds another $4.4 billion of 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 cost. 2025 funded plan contributions are guided to about $800 million, plus about $450 million of 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. Ford’s dividend is back to its prepandemic level, and special dividends were declared for 2023-25.

Read more about Ford Motor‘s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for Ford is High. The firm is spending tens of billions across 2022-27 betting consumers will switch to electric vehicles, and so much capital will be wasted if that adoption is too slow or if regulations change due to not enough consumers switching to EVs. Barriers to entry are declining as a growing global market reduces fixed costs as a percentage of sales for new entrants.

The company operates in a very cyclical industry, and there is uncertainty 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.

Ford’s union relationships have historically been better than GM’s. However, UAW President Shawn Fain said in 2023 that Ford and the UAW are no longer working as a team. We are concerned about a very 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.

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 and more time needed to scale the EV business.
• 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 more fierce.
• 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 Jacqueline Walker.