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, recently made its debut 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 moving higher after a prolonged downtrend, along with peer General Motors (GM). If you’re thinking about buying shares of Ford, 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. Auto sales, especially in pickups, are surging after factory shutdowns created shortages earlier in the year.
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.
Ford’s next quarterly earnings report is expected on Feb. 4.
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 now see some of the new Bronco models, set to hit showrooms in May, online.
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 is 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 75 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 37 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. Recent IPO Arcimoto (FUV) is ranked third.
Ford Stock Technical Analysis
Ford cleared a 9.60 buy point on Jan. 12 as shares surged more than 5% in heavy volume. Investors also could view the current consolidation as a handle on a base going back to Ford’s December 2019 peak. The 5% buy zone extends to 10.08.
Ford stock offered an early entry prior to this traditional breakout. In the second week of 2021, Ford staged an upside reversal at its 10-week moving average.
Additionally, Ford’s Relative Strength Rating has improved alongside the stock’s share-price gains. The RS Rating for Ford stock is now a 76. That means Ford has outperformed 76% of stocks over the past year. Elite growth stocks boast even higher scores, but this is a positive development for Ford.
Ford’s relative strength line — which measures price performance vs. the S&P 500 — surpassed its November peak, which is another bullish signal for this earnings turnaround play.
It’s important to note that Ford has underperformed the S&P 500 for the better part of the last decade. But 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. Closes above that level for the months of November and December are 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?
Ford stock has yet to break its long-term downtrend going back to 2013 or, in some respects, even 1999. However, shares are surging after finding support at key levels. As for the fundamentals, Ford sales and profits are rebounding. The company is moving more into electric vehicles, too.
Bottom line: Ford stock is slightly extended from a proper buy zone. Those who bought the stock coming out of the flat base last week are likely basing their purchase on strong 2021 estimates.
With dollar volume above the $600 million threshold, Ford also shows strong institutional sponsorship. But even with improving earnings, investors may want to focus on top growth stocks with superior fundamentals.
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