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

Ford released its second-quarter earnings report on July 30. 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 Q2 Earnings

Ford’s second-quarter adjusted diluted EPS of $0.37 fell 21.3% year over year on about $800 million of net tariff costs but beat the $0.33 LSEG consensus. Management resumed 2025 guidance after suspending it on May 5, and net tariff costs are now guided at about $2 billion, from $1.5 billion.

Why it matters: The stock fell on July 30 in after-hours trading, likely on the higher tariff impact, but costs excluding tariffs have fallen for four consecutive quarters. Ford is finding more efficient manufacturing methods and ways to reduce materials spending.

• Adding the $2.0 billion tariff impact to the new adjusted EBIT guidance of $6.5 billion-$7.5 billion makes $8.5 billion-$9.5 billion, higher than its Feb. 5 guidance (which had no tariff impact) of $7.0 billion-$8.5 billion, showing progress on costs.
• Adjusted free cash flow guidance is unchanged from Feb. 5 at $3.5 billion-$4.5 billion, so we believe the stock’s fall on July 30 is shortsighted. Still, to reduce tariff risk, we’d like to see Ford act over the next few years to move some production out of Mexico, as GM announced in June.

The bottom line: We are not changing our moat rating or fair value estimate on Ford. We see the stock as undervalued but likely staying that way while the auto industry decides how much tariffs will be passed on to consumers via the 2026 model year product and what consumer reaction will be.

• A cynic can point out that cost controls were helped by excluding a $600 million special item for a fuel injector recall, but we expect recall costs to decline long term as the company’s new manufacturing processes and preventative quality measures continue. Costs were still down with the charge.

Coming up: Ford said it is holding an EV event in Kentucky on Aug. 11. CEO Jim Farley calls the event a Model T moment. The company will talk about its plans for “breakthrough” electric vehicles in the US. The EV business has lost $2.2 billion so far in 2025, so any good news is welcome.

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 think buying Ford’s stock requires 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 new generation EV pickup not launching 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 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 developed markets such as the United States, as they have in Europe. South Korea’s Hyundai and Kia have become formidable competitors, as has Tesla. Nascent EV makers such as Rivian and Lucid could also be formidable threats 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 it 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), which are always unfunded and pay benefits from general corporate cash.

Management often guides funded plan contributions to be limited to annual service costs. 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 share repurchases are possible but will probably be done only to offset dilution from stock options. Ford’s dividend is back to its pre-pandemic level, and special dividends are possible and 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 that consumers will switch to electric vehicles. So much capital will be wasted if that adoption is too slow, or if not enough consumers switch to EVs, causing regulations to change. 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 the covid-19 pandemic. Macroeconomic conditions, rising interest rates, commodity prices, trade agreements, and tariff changes in key markets such as the US, Europe, and China can quickly derail management’s plans and guidance. Significant disruption is on the horizon as vehicles become more high-tech and autonomous.

Read more about Ford Motor’s risk and uncertainty.

F Bulls Say

• Ford’s turnaround will take time, due to its many restructuring projects around the world and the time needed to scale the EV business.
• Ford is focusing its investments where it gets the best return, which is why we think mostly exiting North American car segments and production in South America was the right move.
• Software and data services for fleet customers are a new and lucrative margin stream for Ford compared with just selling vehicles.

F Bears Say

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

This article was compiled by Isela Meraz.