Ford Motor (F) began the new decade with optimism as the automaker emerged from a fundamental corporate redesign to compete in the era of smart vehicles and clean energy. The company is investing heavily in innovation to keep pace with competitors in the markets for autonomous vehicles, ride sharing and electric cars. But is Ford stock a buy now?
The unveiling of the Mustang Mach-E in November 2019 was a key milestone in the company’s pivot toward what former CEO James Hackett called “the digital future.” The Ford Mustang Mach-E, an all-electric crossover, is set to debut before year-end. The Mach-E will compete with the Tesla Model Y.
This new future includes a slew of other new vehicle launches. Among them: a completely redesigned F-150 truck and resurrected Ford Bronco brand. In addition to auto redesigns, the company is embarking on strategic partnerships with Volkswagen (VWAGY), Rivian and Mahindra to strengthen its global presence.
Ford stock is trying to move higher after a prolonged downtrend. If you’re thinking about buying shares, it’s key to analyze the fundamental and technical picture first.
Ford Stock News
Ford crushed Wall Street expectations for Q3 earnings on Oct. 28, lifting shares. The automaker’s EPS surged 91% to 65 cents on revenue of $34.7 billion.
Analysts expected Ford earnings of 22 cents a share on revenue of $32.49 billion.
“We’re committed to creating a Ford that grows profitably and generates sustainable free cash flow,” CEO James Farley said on his first earnings call after taking the helm. “We’re going to allocate capital to the best and highest usage to drive sustainable value creation.”
Lifted by stronger-than-expected demand, Ford saw its best Q3 sales numbers in the pickup truck category since 2005. Overall auto sales jumped 27% in the quarter.
New Ford CEO Takes Over; Announces Executive Changes
On Oct. 1, COO James Farley took the helm as Ford’s CEO. His tenure began with a shake-up of key leadership roles. Ford announced Tim Stone is vacating his role as CFO. He will be replaced by John Lawler, who recently oversaw Ford’s autonomous vehicle unit.
Farley also announced Ford’s intention to invest more in emerging technologies including autonomous vehicles, electric cars and software-as-a-service capabilities. Since the announcements, Ford stock has been on the rise.
Farley is stepping in after disappointing results in Hackett’s three-year bid to reshape the automaker. The centerpiece of Hackett’s tenure was an $11 billion restructuring plan. That plan ran into major roadblocks when Ford botched the redesign and launch of its popular Explorer SUV in 2019.
All in all, Ford stock declined roughly 60% during Hackett’s time as CEO.
Investors reacted positively to the executive change, with Ford stock gaining on the news of Farley’s promotion.
In addition to C-suite changes, Ford announced in July it would be resurrecting its iconic line of Ford Bronco SUVs. Production of the new Bronco lineup will include two-door and four-door models, as well as a smaller Bronco Sport edition. Consumers can expect to see the new Ford lineup in dealer showrooms by end of the year.
Bronco Relaunch Part Of New Strategy
The relaunch of the Bronco SUV — which was discontinued in 1996 — is part of Ford’s overall strategic initiative to capitalize on its iconic brand lineup to boost U.S. revenue and earnings.
Ford President of the Americas & International Markets Group Kumar Galhotra told CNBC in July he expects annual unit sales of the new Ford Bronco series to be “in the hundreds of thousands.” The Bronco SUV family is set to directly compete against the popular Jeep brand owned by Fiat Chrysler (FCAU).
The revival of the popular Bronco vehicle models came just weeks after the Detroit-based car company unveiled details of the latest version of its top-selling Ford F-150 pickup truck in late June. The truck will become the first Ford vehicle to support over-the-air software updates, first pioneered by Tesla (TSLA) in 2012.
Ford Stock Fundamental Analysis
To determine whether Ford stock is a buy now, fundamental and technical analysis is key.
The IBD Stock Checkup Tool shows Ford stock has an IBD Composite Rating of 73 out of a best-possible 99. The rating means Ford stock ranks relatively well vs. all stocks, in terms of the most important fundamental and technical stock-picking criteria.
But Ford stock has an EPS Rating of just 38 out of 99, which compares quarterly and annual earnings-per-share growth with all other stocks. That score has improved since the last quarterly report. Ford has a spotty earnings track record, with many quarters of earnings declines over the past decade.
The rankings place the car manufacturer near the bottom of the pile vs. its automotive industry peers as pure play EV stocks take the spotlight. Tesla (TSLA) currently holds the No. 1 rank in IBD’s Auto Manufacturing industry group. The electric-vehicle company is followed by China’s Nio (NIO) at No. 2. Ferrari (RACE) is ranked third.
Ford Stock Technical Analysis
Ford stock attempted to clear a flat base with a 7.48 buy point in mid-September but immediately hit resistance. Though shares quickly retreated to a two-month low of 6.41 on Sept. 24, it’s since climbed nearly 39%.
Ford stock also has consistently found support near its 21-day moving average since climbing off that 6.41 low. Shares are now testing that support, but haven’t broken down yet.
Another positive indicator: Ford’s 50-day moving average recently moved above the 200-day line. This “golden cross” is generally a bullish indicator.
Additionally, Ford’s Relative Strength Rating has improved alongside the stock’s share-price gains. The RS Rating for Ford stock is now a 73.
The rating tracks market leadership. It shows how a stock’s price performance over the past 52 weeks measures against all other stocks. A rating of 73 means Ford has outperformed 73% of stocks over the past year. Elite growth stocks boast even higher scores, but this is a positive development for Ford.
Still, the automaker remains in a prolonged downtrend since failing to break out from a flat base in July 2019. And Ford has underperformed the S&P 500 for the better part of the last decade.
Looking at a monthly chart, Ford is now solidly above its 24-month moving average. That downward-sloping line is a level Ford previously saw resistance for roughly six years. A close above that level for the month of November is a step in the right direction. But it’s not necessarily a fail-safe sign Ford will continue to move higher from here.
Ford Stock: A Buy Right Now?
Despite short-term gains, Ford stock has yet to break its long-term downtrend going back to 2013 or, in some respects, even 1999.
Bottom line: Ford stock is not a buy right now for investors focused on top growth stocks with superior fundamentals.
YOU MIGHT ALSO LIKE: