Investors.com:
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 was a key milestone in the company’s pivot toward what CEO James Hackett called “the digital future.”
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.
But Ford stock is facing headwinds from a weakening consumer automotive market and China trade tensions. Plus, shares have felt the pressure of the coronavirus outbreak. The Michigan-based car manufacturer heavily relies on China for both parts manufacturing and international revenue.
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 beat Wall Street expectations for Q2 earnings in late July, lifting its stock. The automaker reported a loss of 35 cents a share on automotive revenue of $16.6 billion. Analysts had expected a loss of $1.27 a share with revenue totaling $14.98 billion.
“I could not be prouder of the Ford team’s optimism and effectiveness as we manage through this pandemic,” President and CEO Jim Hackett said about the better-than-anticipated earnings. “We delivered a strong Q2 while keeping each other safe, caring for customers and neighbors, and assuring tomorrow.”
A bleak earnings report in late April left Ford stock investors not too impressed. At that time, CFO Tim Stone warned the automaker expected to have a second-quarter loss of $5 billion as the coronavirus pandemic shuttered production factories and disrupted supply chains. But Ford was able to pare losses to only $2 billion in the second quarter.
Most of this was due to Ford’s ability to open production facilities ahead of schedule. The automaker also got a boost from the announcement of a new lineup of vehicles. This includes the redesigned F-150 truck and the resurrection of the iconic Ford Bronco line. Ford says it received more than 150,000 reservations for the newly redesigned Bronco by the end of July.
Ford announced the company finished its second quarter with more than $39 billion in cash on hand. Executives say this liquidity is expected to sustain the automaker’s cash balance at a level of $20 billion through the second half of the year.
Ford Announces New CEO; Relaunches Popular Bronco SUV
On Aug. 4, Ford announced COO Jim Farley would be promoted to the chief executive role. Farley is set to replace current CEO James Hackett on Oct. 1.
Hackett saw disappointing results in his three-year bid to reshape the company. The centerpiece of his 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.
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 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 comes weeks after the Detroit-based car company unveiled details of the latest version of its popular Ford F-150 pickup truck. 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 44 out of a best-possible 99. The rating means Ford stock ranks in the lower half of all stocks. That’s in terms of the most important fundamental and technical stock-picking criteria.
Ford stock also has a weak EPS Rating of 7 out of 99, which compares quarterly and annual earnings-per-share growth with all other stocks. That low score is due to Ford’s 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. Tesla (TSLA) currently holds the No. 1 ranking in IBD’s Auto Manufacturing industry group. The electric-vehicle company is followed by Nio (NIO) at No. 2. Ferrari (RACE) is ranked third.
Ford Stock Technical Analysis
Ford stock attempted to clear a cup-with-handle buy point of 7.16 in early August. That also coincided with the first time Ford closed above its 200-day line since late 2019. But the stock quickly hit resistance and fell back below the buy point.
That entire base formed below Ford’s 200-day moving average, which isn’t ideal. Growth investors should focus on stocks in uptrends, outperforming the broad market and trading above their 200-day lines.
After several weeks of hitting resistance at the 200-day, Ford is finally back above that level. It’s showing relative strength as the broad market comes under pressure.
It’s key to mention the 50-day moving average for Ford stock is on pace to cross above the 200-day line. The “golden cross” is generally a bullish indicator. 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.
Underscoring Ford’s overall weakness despite short-term strength is a mediocre Relative Strength Rating of 46 out of 99. 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 46 means Ford has only outperformed 46% of stocks over the past year.
Ford Stock: A Buy Right Now?
The coronavirus pandemic, trade headwinds and a weakening consumer automotive market are weighing on the company’s earnings and revenue outlook after an expensive corporate restructure. 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.
