Ford Earnings: Why And How I Plan To Sell At $11

Ford Motor Company (F) has long been a cornerstone of the automotive industry, but its recent earnings and valuation metrics paint a cautionary tale for investors. While the company's Q2 2025 results—$50.18 billion in revenue and $0.37 in EPS—appear robust on the surface, a deeper analysis reveals a fragile foundation. The stock's current price of $11.11, though modest, sits at a psychological crossroads: a potential value trap for those who mistake low multiples for safety. Here's why selling at $11 is a strategic move before looming cost pressures and recall expenses erode near-term upside.

Earnings: A Facade of Resilience

Ford's Q2 2025 results were headline-grabbing, with revenue exceeding forecasts by 10.8%. However, the $36 million net loss in the same quarter—a product of $570 million in recall expenses and $800 million in tariff-related charges—exposes the cracks beneath the surface. While Ford's commercial fleet division (Ford Pro) delivered $2.3 billion in earnings, the company's electric vehicle (EV) segment reported a $1.3 billion loss, up from $1.1 billion the previous year. This trend underscores a critical issue: Ford's pivot to EVs is hemorrhaging cash at a time when profitability is paramount.

The company's adjusted EBIT of $2.1 billion for Q2 is impressive, but it masks the structural challenges of a legacy automaker racing to catch up in a tech-driven market. For context, Tesla's (TSLA) P/E ratio of 187.67 reflects its dominance in EV innovation, while Ford's 7.82 P/E appears cheap—until you factor in its $1.3 billion EV loss and $3 billion in annual tariff costs.

Valuation: Cheap, But Not Safe

Ford's valuation metrics—P/E of 7.82, P/B of 0.238, and P/S of ~0.234—suggest an undervalued stock. Yet these metrics ignore the company's operational risks. A P/B ratio below 1 implies the market values Ford's assets at a discount, but this could reflect skepticism about its ability to monetize those assets in the EV era. Meanwhile, a P/S ratio of 0.234 suggests Ford is trading at 23 cents for every dollar of revenue—a price that assumes profitability will materialize. But with EV losses widening and tariffs eating into margins, that assumption is increasingly tenuous.

Risks: Tariffs, Recalls, and Cost Overruns

Ford's Q2 earnings report laid bare the headwinds it faces:
1. Tariffs: A $3 billion annual cost, with $2 billion factored into full-year guidance.
2. Recalls: A $570 million charge in Q2 alone, signaling recurring operational inefficiencies.
3. EV Overhang: The $1.3 billion loss in Ford's EV segment highlights the gap between its ambitions and execution.

These risks are not isolated incidents but symptoms of a larger problem: Ford's struggle to balance legacy costs with future innovation. For example, the cancellation of an electric vehicle program in Q2—costing $570 million—shows the company's roadmap is still in flux. Meanwhile, its “Model T moment” rhetoric about EVs rings hollow when compared to Tesla's first-mover advantage and economies of scale.

Why $11 Is the Exit Point

Ford's stock has traded between $8.44 and $11.97 over the past year, with $11.11 as its current price. Selling at $11—just 1% below the current level—offers a disciplined exit strategy for several reasons:
1. Near-Term Catalysts: The company's updated EBIT guidance ($6.5–7.5 billion) and $15¢ dividend suggest short-term stability. However, these metrics are contingent on absorbing $3 billion in tariffs and $1.3 billion in EV losses. A $11 price tag reflects the market's skepticism about Ford's ability to meet these targets.
2. Cost of Carry: Ford's EV losses and tariff costs are likely to widen in 2026 as supply chain bottlenecks persist and EV competition intensifies. Holding the stock risks eroding gains made in Q2.
3. Dividend Sustainability: While Ford's 6.9% yield is attractive, it is funded by a commercial fleet business (Ford Pro), not its core EV or truck segments. If Ford's losses accelerate, the dividend could be at risk.

Historical data from the backtest underscores the volatility of Ford's stock post-earnings: a 46.67% win rate over 3 days, 40% over 10 days, and an average 3-day return of -0.97%. This suggests that while short-term gains are possible, the stock's performance following earnings releases has been mixed, with an overall negative bias in the immediate aftermath. Investors holding past the 3-day window may see modest recovery, but the risks of prolonged drawdowns—particularly in a sector with shifting cost structures—remain high.

Conclusion: Exit Before the Value Trap Closes

Ford's earnings story is a classic value trap: low multiples mask structural weaknesses. The company's balance sheet ($46 billion in liquidity) and dividend streak are positives, but they do not outweigh the risks of an EV strategy that is expensive, unprofitable, and trailing rivals. Selling at $11 locks in modest gains while avoiding the potential for further losses as tariffs, recalls, and EV overhangs weigh on the stock. For investors, patience is not always a virtue—sometimes, it's a trap.

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