Is Ford Stock A Buy After Earnings As Automakers Charge Higher?

Ford Motor (F) began the new decade with optimism as it emerged from a fundamental corporate redesign to compete in the era of smart vehicles and clean energy. The automaker is investing heavily in new technologies 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 it called "the digital future." The Ford Mustang Mach-E, an all-electric crossover, made its commercial debut in the U.S. late last year. Ford is beginning production of the Mach-E, a competitor to the Tesla (TSLA) Model Y, in China as well. And Ford didn't stop at electrification with a crossover — it now has an electric version of the F-150 coming early next year.

After a prolonged downtrend, Ford stock is revving up along with peer General Motors (GM). But where does Ford stand now? If you're thinking about buying shares, it's key to analyze the fundamental and technical picture first.

Automaker Issues 'Green Bonds'

Ford raised roughly $2.5 billion on Nov. 8 after issuing a series of "green bonds" to fund clean energy projects. These ESG bonds are slated to mature over 10 years with an anticipated price yield of 3.625%, according to multiple news reports. Ford stock rose.

The new bonds will also help the Detroit automaker cut borrowing costs by nearly half as it plans to repurchase $5 billion of junk-rated debt.

"Winning businesses are financially healthy and lead in sustainability," Ford CFO John Lawler said in a Nov. 4 news release. "We're again putting our money where our mouth is, prioritizing and allocating capital to environmental and social initiatives that are good for people, good for the planet, and good for Ford."

Ford October Sales Up Month-Over-Month

Ford's monthly auto sales saw a rebound in October. Overall U.S. sales came in at 175,918 vehicles, down 4% vs. last year. However, that's an improvement over September's total of 156,614 vehicles. SUV sales hit their highest October levels in 21 years, according to the automaker. SUV retail sales were up 17.4% vs. a year ago thanks to strong sales of the popular Bronco and Mustang Mach-E models. Ford remained the top-selling U.S. automaker for the second month in a row. Ford stock rose on the news.

EV sales continued to break records for the Detroit carmaker. Total EV sales hit 14,062, representing a year-over-year increase of 195%. The all-electric F-150 notched a total of 160,000 reservations.

The new truck model will compete amid a growing marketplace lineup of electric pickups. In addition to Tesla's (TSLA) heavily publicized Cybertruck, GMC and Chevy also have announced plans to release electric versions of the Hummer and Silverado truck models, respectively.

A Rivian EV pickup launched in late September, with GM's Hummer EV due out later this year. The Tesla Cybertruck is expected to launch in late 2022, but volume production won't start until 2023.

Ford Stock Earnings

Ford blew away estimates in its Q3 earnings report on Oct. 27. The automaker recorded adjusted earnings of 51 cents per share, almost doubling Wall Street projections. Revenue totals clocked in at $35.7 billion. That number was down moderately from the same quarter a year ago due to ongoing chip shortages affecting the auto industry. Ford stock rose roughly 5% in after-hours trading.

"This is the most exciting Ford lineup I've seen," President and CEO Jim Farley said in an Oct. 27 earnings statement. "The trajectory of our business gives us huge confidence in Ford+ (Ford's growth plan), and we're obsessively turning the plan's promise into reality."

In Q3, Ford's new vehicle sales in the U.S. fell 27%. But average transaction prices rose 13% to $51,460, according to Edmunds data, benefiting from higher demand for pickup trucks and SUVs. In China, Ford's Q3 sales fell 9%. In Europe, its Q3 sales fell 35%.

Executives also raised Ford's adjusted EBIT to between $10.5 billion and $11.5 billion for the full year.

Ford Stock Rises On EV Battery Plant Deal

On Sept. 28 Ford announced a deal with battery partner SK Innovation to build new EV and battery plants. CEO Jim Farley called the $11.4 billion deal one of Ford's "biggest investments ever" in a statement. Ford joins GM and Volvo as the latest automaker to bring battery production in-house as they seek to challenge rival Tesla.

The new "mega-sites" will produce electric versions of Ford's top-selling F-Series trucks, according to a release. They also will make batteries for future Ford and Lincoln electric vehicles. Production is set to begin in 2025. Ford stock rose on the news.

Earlier this month, Ford inked a deal with Redwood Materials to recycle materials from used battery packs. The Sept. 22 deal helped lift Ford stock roughly 4% on the day.

Ford's spending related to EV initiatives is expected to grow to more than $30 billion by 2025. In July, Ford snagged Car and Driver's 2021 EV of the Year award. The magazine, which publishes an annual list of best autos, singled out the Mustang Mach-E as its top pick in the electric-car category.

Ford, Walmart Partner On Self-Driving Cars

Ford and Walmart (WMT) announced the testing of autonomous-vehicle delivery services in three cities on Sept. 15.

The big-box retailer will deploy Ford Escape SUV hybrids augmented with Argo AI technology. Ford invested $1 billion in Argo in 2017. Initial testing will start in Miami, Austin and Washington, D.C., later this year. The companies said the autonomous delivery service will be available at first within defined service areas of the three cities, with plans to expand.

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 91 out of a best-possible 99. The rating means Ford stock ranks relatively well vs. all stocks, but not outstanding, in terms of the most important fundamental and technical stock-picking criteria.

Ford stock has an EPS Rating of 36 out of 99, which compares quarterly and annual earnings-per-share growth with all other stocks. Ford has a spotty earnings track record, with many quarters of earnings declines over the past decade. But forward-looking estimates are pointing to growth.

The rankings place the carmaker in the No. 4 spot vs. its automotive industry peers. IBD's automaker group is ranked a strong No. 7 out of the 197 industry groups tracked by IBD. In general, it's ideal to focus on top stocks in the top quartile of IBD's groups, and the group has improved from a near-worst ranking just months ago to join the top 10.

Ford Stock Technical Analysis

Ford stock powered out of a cup base with a strong earnings gap-up on Oct. 28. Shares shot up as much as 13% before settling into the lower range of the price bar. Still, Ford ended up gaining 8.7% on that day, with heavy volume behind the move. With the stock extending its gains since, shares are now well extended from the proper 5% buy zone.

In fact, shares are hitting the 20%-25% profit-taking zone and have triggered the eight-week hold rule. Such powerful moves tell you the stock has a big chance to become an outstanding winner and that it deserves more leeway.

Prior to that gap-up, Ford was pulling back after topping a 16.55 buy point on Oct. 21. Investors could have keyed off the Oct. 21 intraday high of 16.70 as the start of a high handle, offering a 16.80 entry.

Ford stock is making a big move off its August and September lows. EV battery production-related headlines helped lift Ford shares above their downward-sloping 50-day line. The previous high of 14.79 was a resistance level for Ford stock, with it hitting that point on July 29 and Oct. 4. A strong gain on Oct. 7 fueled Ford above that level, marking a buying opportunity.

An even earlier entry for investors could've been when shares cleared a declining-tops trend line in late September. That coincided with Ford stock getting back above its 50-day line.

Consider Ford's Relative Strength

Ford's relative strength line — which measures a stock's price performance vs. the S&P 500 — is heading higher, and surpassed highs that coincided with the stock's previous peak of 16.45 in June.

IBD's research shows the importance of focusing on stocks outperforming the market.

Ford Stock: A Buy Now?

On a monthly chart, Ford stock is breaking above its long-term downtrend going back to 1999. Looking at the weekly chart, shares have made a big move off 2020 lows. Ford stock has made a big run since reporting earnings.

Bottom line: Ford stock is a not buy now as shares are extended from the 5% buy zone. At this point, investors should wait to see if Ford stock pulls back to offer an alternate entry before getting in. Though Ford stock has triggered the eight-week hold rule, investors who bought at the breakout can opt to take partial profits as shares hit the 20%-to-25% profit zone. Those with absolute conviction in Ford stock can hold to see if gains can go higher.