Ford’s (F Quick QuoteF - Free Report) energy division has signed its first major customer agreement, securing a five-year battery storage supply deal with EDF Power Solutions North America. The agreement marks an important milestone for Ford Energy as it pushes deeper into the fast-growing energy storage market tied to renewable power and grid modernization.

Per the deal, EDF can procure up to 4 gigawatt-hours of Ford Energy’s DC Block battery storage systems annually, representing a potential 20 gigawatt-hours over the contract period. The systems are designed for grid-scale energy storage applications and use lithium iron phosphate battery technology— a chemistry widely favored for its lower cost and improved safety profile. Deliveries are expected to begin in 2028, although Ford has indicated broader production could start by late 2027.

The deal is encouraging because it shows Ford Energy is beginning to attract large commercial customers in a market expected to see strong long-term demand growth. It also opens the door for future agreements with utilities, renewable developers, and even hyperscalers that require large-scale backup power and energy storage solutions.

While the EDF deal strengthens Ford’s long-term growth narrative, is this a strong enough reason to buy Ford stock now?

Ford’s Energy Diversification

Ford’s push into energy storage is part of a broader effort to diversify its business beyond vehicle sales. The company created its energy division to better utilize its growing battery manufacturing footprint, especially as electric vehicle demand has cooled from earlier expectations. Ford plans to invest nearly $1.5 billion into the business in 2026 and is targeting 20 gigawatt-hours of battery storage capacity by 2027.

The strategy is also practical from a manufacturing standpoint. Ford built large battery plants in Kentucky and Marshall, MI, primarily to support EV production. However, slower EV adoption created excess capacity risk, pushing the company to explore adjacent markets where battery demand remains strong. Alongside EV batteries, the Marshall plant will also produce smaller energy storage systems for residential applications.

Ford’s closest peer, General Motors (GM Quick QuoteGM - Free Report) , has also been building its own energy ecosystem through residential backup power, bidirectional charging technology and stationary storage systems. Last year, General Motors partnered with Redwood Materials to accelerate energy storage deployments using second-life EV batteries.

Then there is Tesla (TSLA Quick QuoteTSLA - Free Report) , which remains far ahead in the energy storage market. Tesla’s Megapack and Powerwall products have already established strong commercial traction, and the company’s energy business has become one of its highest-margin segments.

Ford’s Price, Valuation & Estimates

Shares of Ford have risen 5% over the past six months, outperforming Tesla, but underperforming the broader industry and General Motors.

6-Month Price Performance Comparison

Image Source: Zacks Investment Research

From a valuation standpoint, F also appears relatively inexpensive. The stock trades at a forward sales multiple of around 0.30, which is lower than the broader auto industry as well as General Motors. Of course, the gap is much wider compared to Tesla, which continues to command a massive premium valuation due to its bold bets on artificial intelligence, autonomous driving and robotics.

F Looks Undervalued

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for F implies year-over-year EPS growth of 47% in 2026 and 13% in 2027. However, the estimate revisions have been mixed. EPS estimates for the current quarter, the upcoming quarter, and full-year 2027 have moved lower over the past 60 days, while 2026 estimates have edged higher during the same period.

Image Source: Zacks Investment Research

Key Factors Investors Should Watch

The company’s Ford Blue and Ford Pro divisions continue to perform relatively well. Ford recently raised its 2026 EBIT outlook for the Ford Blue business to $4.5-$5 billion, supported by better operational execution and stable demand trends. Meanwhile, Ford Pro remains one of the company’s strongest profit drivers, benefiting from healthy commercial vehicle demand as well as growing software and service revenue streams. Ford expects the segment to generate $6.5-$7.5 billion in EBIT this year.

However, the company’s EV business continues to weigh heavily on profitability. The Model e division posted a $777 million EBIT loss in the last reported quarter, with margins remaining deeply negative. Although losses improved from last year, Ford still expects the segment to lose $4-$4.5 billion in 2026 amid weaker-than-expected EV demand.

Cash flow is another area investors should watch closely. Ford burned nearly $2 billion in free cash flow in first-quarter 2026, while higher aluminum costs and broader commodity pressures are expected to create headwinds of about $2 billion. Rising geopolitical tensions and elevated oil prices could also further increase logistics and input costs going forward.

Final Thoughts

The current setup for Ford is not quite convincing enough to warrant a buy rating. Ford Energy gives the company exposure to a potentially massive long-term market, and the EDF deal is an important early validation of that strategy. That said, Ford’s energy business remains too small and too early-stage to materially change Ford’s earnings profile anytime soon.

Yes, the stock’s low valuation adds some appeal, but investors should not ignore the bigger picture. Ford is still struggling with weak EV economics, inconsistent free cash flow and rising cost pressures.

Existing shareholders can continue holding the stock as management works through the transition, but for new investors, this doesn’t seem like a good time for fresh buying. Ford currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.