Here's Why Ford Motor Stock Is a Buy Before May 5

The countdown has begun. In just five days, on Monday, May 5, Ford Motor Company (NYSE: F) will report its Q1 2025 earnings, and attempt to repeat the earnings beat that archrival General Motors turned in this past Tuesday. Can Ford do it?

Ford Q1 earnings

It shouldn't be hard. According to analysts polled by Yahoo! Finance, Ford only needs to earn a bare $0.02 per share to meet expectations next week, a much lower bar than the $0.49 per share the company earned a year ago. Ford can even admit to a 10% drop in revenue, and not miss its mark. Analysts only expect the company to report sales of $35.8 billion.

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When you consider that automotive rival GM reported both sales and earnings growth, but everyone's expecting Ford to drop on both top and bottom lines, the threshold for outperformance has been set, really, really low. Ford should be able to "Evel Knievel" these forecasts with three wheels tied behind its back.

Why Ford might fail

That's not to say Ford cannot miss earnings. President Trump's tariffs policy -- or policies I should say, since they seem to change by the day -- have injected a sizable amount of uncertainty into the automotive market. Just because the trade war didn't prevent GM from beating expectations last quarter, it doesn't necessarily mean Ford will emerge unscathed.

It's also possible that Ford might fumble a positive earnings report by issuing bad guidance, and perhaps be overly cautious in predicting the earnings it will make in Q2, or later in the year. That could scare investors away from the stock no matter how the earnings turn out. Ford wouldn't even necessarily be wrong to take a cautious tone, either.

As Bank of America warned last week, uncertainty as to the medium-term effect of tariffs is "extremely elevated," and really, no one knows for certain how this is all going to play out.

Image source: Getty Images.

Investors need to focus on the valuation at Ford

All this being said, I'm still confident that Ford stock is a buy ahead of earnings -- even lacking any special knowledge as to what those earnings will be. How?

Consider the stock price. Since President Trump launched his "reciprocal tariffs" trade war last month, shares of Ford stock have hardly budged at all. They entered the month of April at $10.03 per share. They exited the month trading for $10.01. Considering all the elevated uncertainty, and the automotive sector's starring role in the tariffs debate, you'd expect the stock to have performed much worse if there was any "fluff" at all in the stock's valuation.

The fact that Ford stock held basically rock-steady tells me Ford stock is probably about as low as it can go already, and there's really nowhere to go from here, but up.

Ford's ultra-cheap valuation supports this theory. Currently, the stock trades for just 7 times trailing earnings, a slight discount to the earnings valuations on GM and Toyota for example. The really big difference between these three car stocks, though, is that GM pays its shareholders a dividend yield of only 1.3%, and Toyota Motor isn't much better at 2.7%. In contrast, Ford stock pays a tremendous 7.4% annual dividend.

What's more, because Ford needs to spend only about 53% of its profits on dividends to maintain its current payout (we call this the payout ratio), we know that Ford can in fact maintain its dividend easily.

Long story short, I don't know how the tariffs war will play out. (And here's a secret for you: Neither do the experts). What I do know is that no matter how high tariffs go, and no matter who has to pay them, people are still going to need to buy cars and trucks in the future, and Ford will continue to sell them. The business is solid, the dividend is solid, and neither one is going away no matter what happens with tariffs.

I think Ford stock right now is about as low as it's going to go. I firmly believe it's a "buy" before earnings.

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Bank of America is an advertising partner of Motley Fool Money. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.