The investment case for Ford (F +11.95%) is more complex than it initially appears. On the one hand, it's an automotive company with a great history trading on a low valuation and whose sum of its parts is worth more than the whole. On the other hand, it's a company struggling to keep pace with a highly dynamic industry that's transforming. Which hand will prevail? Here's one viewpoint.
How Ford makes money
Let's start by looking at the company in terms of its segment performance for the first half of 2026. It's easy to look at the table and conclude that Ford has a great commercially focused business (including light trucks and vans) in Ford Pro, with a low margin and internal combustion engine (ICE) and hybrid car business in Ford Blue attached to it. Meanwhile, Ford continues to make significant losses in the electric vehicle (EV) market through its poorly performing Ford Model e segment -- a business that lost $5.1 billion last year.
|
Ford Segment |
Revenue |
Growth |
EBIT |
EBIT Margin |
Description |
|---|---|---|---|---|---|
|
Ford Pro |
$34 billion |
(3)% |
$3.6 billion |
10.7% |
Ford and Lincoln vehicle sales to "commercial, government, and rental customers" |
|
Ford Blue |
$46.8 billion |
(3)% |
$0.8 billion |
1.6% |
Ford and Lincoln internal combustion engine and hybrid vehicles and services |
|
Ford Model e |
$3.6 billion |
184% |
(2.2) billion |
(60.5)% |
Electric vehicle and services sales to retail customers |
Data source: Ford presentations and Securities and Exchange Commission filings. EBIT = earnings before interest and taxes.
The case for hidden value in Ford stock
As such, it's not difficult to cobble together an argument that Ford might better release value for investors by separating Ford Pro from the rest of the company and managing Ford Blue and Ford Model e together as a combined entity, as it finesses a shift in revenue mix to EVs from ICE.
Consider that Ford stock trades on just 10.3 times estimated earnings for 2025, and most of those earnings are coming from the Pro business. Additionally, Ford Pro has a growth opportunity in generating recurring revenue through services, such as telematics, for commercial fleets on a subscription basis. It adds up to make a case for buying Ford stock, and Wall Street analysts and shareholders alike have asked management about the subject.
NYSE: F
Key Data Points
Ford's strategic direction
In response, CEO Jim Farley has thus far dismissed the idea and stressed the importance of keeping the Pro business an integral part of Ford.
He's right, but the reasons he's right highlight the risks inherent in investing in Ford at this time. In a nutshell, Ford and Farley are caught between a rock and a hard place, with industry trends making it essential that Ford do what it does least well, namely, investing in its EV business.
Indeed, Ford's management recently committed to a $5 billion investment to develop EVs (starting with a $30,000 pickup truck in 2027) and create a new Ford Universal EV Production System.
Farley's plans make sense for several reasons. First, each Ford segment has crossover activity from other parts of the business.
|
Ford Segment |
Crossover |
|---|---|
|
Ford Pro |
"Selling ICE, hybrid, and electric vehicles, and providing digital and physical services to optimize and maintain fleets, including telematics and EV charging solutions" |
|
Ford Blue |
"Provides hardware engineering and manufacturing capabilities to Ford Model e and manufactures vehicles on behalf of Ford Pro" |
|
Ford Model e |
"Provides software and connected vehicle technologies on behalf of the enterprise, and manufactures certain EVs, including for Ford Pro" |
Data source: Ford SEC 10-K filings. ICE = internal combustion engine. EV = electric vehicle.
Second, and most importantly, the growth area of the auto market is in EVs, and Ford needs to be relevant. The all-in bet is not an option; it's an imperative.
Third, Ford's dominant position in commercial vans and light trucks in the U.S. through Pro could come under serious threat as rivals like Rivian and Volkswagen produce competitive options -- Ford recently pushed back the release date of its new e-van to 2028 from 2026.
Fourth, Ford requires the cash flow from the Pro segment to support its essential investment in EV development.
Fifth, the Universal EV Production System implies a flexible architecture that will be applied across all of Ford's EVs.
Image source: Getty Images.
Is Ford stock a buy?
All told, Ford is not a hidden value Ford Pro business with a free bet on EVs attached to it. Instead, it's an investment in the company doing what it's failed to do thus far, namely, become a major player in the EV market. That argument applies to both its passenger car business and its vans and light trucks in the Pro segment.
If you are comfortable with that and the valuation makes sense, then the stock is a buy, but it might prove a stretch for most investors.
