Key Points
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Ford ranked as the top mainstream brand in the J.D. Power 2026 U.S. Initial Quality Study, up from No. 15 in 2023.
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The company says it is on track for $1 billion in material and warranty cost reductions this year.
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Shares trade at about 8 times forward earnings and yield more than 4%.
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Ford (NYSE: F) is the top-ranked mainstream brand in J.D. Power’s 2026 U.S. Initial Quality Study — the first time the automaker has led the mass-market rankings since 2010. The study, released in late June, measures the problems owners report in their first 90 days with a new vehicle.
Ford posted 152 problems per 100 vehicles, better than every mass-market rival and all but two brands in the industry. For a company that ranked No. 15 among mainstream brands as recently as 2023, that is a remarkable climb.
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A 16-year drought ends
Ford’s win was not narrow. The F-150, Mustang, and Super Duty each ranked highest in their segments, and seven of the 10 Ford models tested placed in the top three of their segments. The brand also improved by 41 problems per 100 vehicles compared with last year’s study, the largest improvement among mainstream brands.
The industry got better, too, with the average improving to 175 problems per 100 vehicles from 192, and Ford beat that average by a wide margin.
The reason all of this matters to investors comes down to warranty costs. When vehicles leave the factory with defects, the automaker pays for it later in warranty claims and recalls. And Ford has spent years working to bring those costs down.
CEO Jim Farley himself has linked quality to profits, citing in the company’s fourth-quarter earnings release “lowering material and warranty costs and making real progress on quality” as part of the company’s improvement plan. Even more, in its first-quarter update in late April, Ford said it is on track for $1 billion in material and warranty cost reductions this year.
The financial rebuild behind the trophy
This quality push comes at a time when investors are looking for more good news from Ford in order to combat the bad news. Ford’s adjusted earnings before interest and taxes (EBIT) fell from $10.2 billion in 2024 to $6.8 billion in 2025, and the company reported a full-year net loss of $8.2 billion on special charges that included impairments tied to canceled electric vehicle programs. And costs tied to a disruption at aluminum supplier Novelis and to tariffs weighed on the year, too (though management says it is on track to recover the Novelis-related profits in the second half of 2026).
The first quarter, however, pointed in the other direction. Revenue rose 6% year over year to $43.3 billion, and adjusted EBIT climbed to $3.5 billion from $1.0 billion in the year-ago quarter, expanding the company’s adjusted EBIT margin to 8.1% from 2.5%. A one-time $1.3 billion tariff refund helped, but even excluding it, adjusted EBIT more than doubled. And management raised its full-year adjusted EBIT guidance to a range of $8.5 billion to $10.5 billion, up from a prior range of $8.0 billion to $10.0 billion.
But even the high end of that guidance only gets Ford back near its 2024 earnings power. In other words, the rebuild still has a ways to go before investors can view Ford as a healthy, growing business.
And this one award doesn’t necessarily solidify Ford’s value proposition in terms of quality. The company has also continued to issue recalls at a high rate this year. And, of course, investors should remember that this is still a cyclical and capital-hungry business. This makes earning a good return on invested capital difficult.
With that said, the stock isn’t asking for much. At about $14 as of this writing, shares trade at about 8 times forward earnings. And Ford’s regular dividend of $0.60 per share annually gives the stock a yield of more than 4% at the current price. A valuation like that already prices in plenty of skepticism.
So, what does the quality crown mean for the stock? It won’t move earnings on its own. But it may be the most credible evidence yet that the costs that have dogged Ford for years could keep coming down — and cheaper warranty claims flow straight to the bottom line. I think shares look attractive here. Still, this is an auto stock, and demand can swing hard with the economy. I’d keep any position modest and watch whether the cost savings continue to materialize.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
