FORD MOTOR CO (F) stock intrinsic value fair value estimate & owner earnings analysis

Ford designs, builds and sells cars, trucks and vans through three units: Ford Blue (gasoline and hybrid vehicles), Ford Model e (electric vehicles) and Ford Pro (commercial customers). It also owns Ford Credit, which finances Ford's dealers and customers. The United States produced about 65% of 2025 revenue of $187.3 billion. Ford Credit is a lender, so its $141.4 billion of debt is the raw material of that business: we count Ford Credit's earnings after its own interest and do not subtract its debt. We do subtract the $21.9 billion owed by the rest of Ford. How we measure cash earnings. We start with operating cash flow and take out (1) all swings in working capital, including the large yearly build in payables and accrued liabilities, (2) stock compensation, (3) capital spending, less a small growth allowance tied to revenue growth (capital spending has averaged 4.6% of revenue), and (4) the depreciation on vehicles Ford Credit leases out plus its credit-loss provisions, because the purchase of replacement lease vehicles sits outside operating cash flow. We take out the accrual build because it is mostly warranty and dealer-incentive costs that have been expensed but not yet paid; Ford's annual report says the cash outflows for warranty accruals will occur over several years. We then add back the interest paid on the non-Ford Credit debt ($1.25 billion in 2025), since that debt is subtracted directly. On this basis Ford's cash earnings before the debt were $1.21 per share in 2021, $1.61 in 2022, $1.09 in 2023, $0.74 in 2024 and negative $0.69 in 2025. We use the median of 2021-2025, $1.09 per share (about $4.4 billion a year), as the normal level. We start in 2021 because that is when Ford moved to today's three-unit structure with capital spending of $6-9 billion a year; the 2020 pandemic shutdown and earlier years describe a different cost and investment profile. Over ten years the after-interest figure ranged from $1.56 (2016) to negative $1.27 (2020), which confirms how cyclical the business is. This measure is well below Ford's own adjusted free cash flow ($3.5 billion in 2025), which is company-defined and includes the accrual build, so we do not use it. Near-term path. Cash earnings fell from $0.74 per share in 2024 to negative $0.69 in 2025. Our base case starts 2026 at negative $0.18 (about negative $0.7 billion), an improvement of $0.51 per share, for two dated reasons stated in Ford's 2025 annual report: fires at aluminum supplier Novelis in September and November 2025 cost Ford about $2 billion in 2025 and Ford expects about $1.0 billion of improvement in 2026, and Ford expects about $1.0 billion lower tariff costs in 2026 from a full year of expanded tariff credits. First-quarter 2026 operating cash flow was $1.3 billion against $3.7 billion a year earlier, so we credit nothing more than those two items for 2026. Base case. 2026 is negative $0.7 billion. In 2027 the remaining Novelis headwind, which the report describes as temporary costs, ends and cash earnings are about $0.3 billion. We then return over 2028-2029 to $3.0 billion a year, the level Ford produced in 2024, the last year before the fires and the tariffs; that is $1.4 billion below the normal level because tariffs remain in place. This is a return to a level already reached, not growth. The level is held flat through 2035 and then fades in a straight line to zero over 20 years, because a century-old truck, van and dealer franchise justifies a long tail but we cannot evidence anything beyond it. On that path the business is worth $25.9 billion. It owes $14.9 billion: $21.9 billion of non-Ford Credit debt, less $8.7 billion of the $28.7 billion cash pile above the $20 billion Ford says it keeps, plus $1.7 billion Ford is committed to pay in cash on cancelled EV programs ($1.2 billion) and the exit from the BlueOval SK battery venture ($0.5 billion). The difference is $11.0 billion, about $2.70 per share on 4.07 billion diluted shares. Debt costs about 6% (2025 interest of $1.25 billion on roughly $21 billion), so no adjustment was needed. Bear case. Only the two evidenced recoveries happen: 2025's negative $2.7 billion improves by $2.0 billion for Novelis and $1.0 billion for tariffs to about $0.3 billion a year from 2027, held to 2035 and then faded over 20 years, with nothing else improving even though Ford Blue's 2025 profit already fell to $3.0 billion from $5.3 billion. Ford also warns it may incur up to about $4 billion of further EV-related expenses and cash costs, which we deduct in full. The business is worth $2.0 billion and owes $18.9 billion, so the company appears to owe more than it is worth by roughly $16.9 billion, or about $4.15 per share. In this case cash earnings sit below the roughly $1.25 billion annual interest bill for years, which is why value is negative. Near-term refinancing is not the issue: $5.55 billion of debt falls due in 2026, against $49.8 billion of liquidity. Bull case. The fires are fully behind Ford, tariff relief holds, and Ford Credit delivers the roughly $2.5 billion of pre-tax profit it guides for 2026. Cash earnings are $2.0 billion in 2027 and $4.4 billion from 2028 (the five-year median, which includes 2023's UAW strike costs), held through 2035 and then faded over 20 years. The business is worth $41.5 billion, owes $14.9 billion, and the difference is $26.5 billion, about $6.52 per share. What we left out. We did not credit Model e reaching profit (Ford guides a $4.0-4.5 billion loss for 2026), new products such as the Universal EV platform or Ford Energy, price increases, higher industry volumes, or any further build in accrued liabilities, because none is contracted or a repeated result Ford has already achieved. What would make us wrong. We tested our exclusion of the accrual build against the balance sheet: payables and other liabilities rose from $72.2 billion at the end of 2022 to $88.5 billion at the end of 2025, so the build has been persistent. We still exclude it because the annual report says warranty payments lag accruals by several years and part of the 2025 increase reflects EV charges not yet paid. If those liabilities keep growing instead of being paid, Ford keeps several billion dollars a year more than we credit and every case would be worth materially more. Value would also be higher if Model e losses shrink faster than Ford's guidance, and lower if tariffs or supply disruptions worsen. Change since our August 2026 analysis. We previously valued Ford at $8.63, $19.43 and $41.19 per share (bear, base, bull). The new figures are lower for two reasons. First, we now exclude the yearly build in accrued liabilities and charge the replacement of Ford Credit's lease vehicles, which our earlier earnings figure did not, and we now discount every case at a flat 6% instead of 8.5-11.5% (which on its own would have raised values). Second, 2025 cash earnings fell sharply with the Novelis fires and tariffs. Partly offsetting, Ford Credit is guided to higher profit in 2026 and Ford expects some relief from tariffs and aluminum supply.