Ford Motor (F) began the new decade with optimism as it emerged to compete in the era of smart vehicles and clean energy. The automaker is investing heavily in new technologies to keep pace in autonomous vehicles, ride sharing and electric cars. But does all that effort make Ford stock a buy right now?
XThe 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. in late 2020. 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 there — it recently delivered its first F-150 Lightning all-electric pickup.
Ford's investment in electrification helped push shares to a 140% gain in 2021. That led to Ford briefly surpassing General Motors (GM) in market cap for the first time in five years. But where does Ford stand now? If you're thinking about buying shares, it's key to analyze the fundamental and technical picture first.
Ford Secures Lithium Supply
Ford completed a deal which will provide the automaker with lithium over a five year period. Australian mining company Liontown Resources said on June 29 that it would provide Ford with an annual supply of 150,000 dry metric tons of spodumene concentrate—a key component of EV batteries. Deliveries of those lithium resources will commence in 2024 and will come from Liontown's Kathleen Valley mining project site in Western Australia.
Ford is the latest automaker to ink a deal with the Australian exploration and mining firm. Liontown recently signed lithium supply deals with Tesla and South Korean EV battery maker LG Energy earlier this year.
Adds To Plans To Boost EV Spending
Ford plans to invest $3.7 billion to boost EV and gas-engine vehicle production, the company announced on June 2. That money will go into retooling and upgrading factories in Michigan, Ohio and Missouri. Ford's investment is also expected to create 6,200 union manufacturing jobs.
The Detroit automaker's latest spend to expand EV production reflects Ford's growing investment in the electric vehicle market. In mid-March, Ford extended a deal with Volkswagen (VWAGY) that would double European EV production to 1.2 million cars by 2023. The automaker also made initial agreements with SK Battery and Koc Holding to build an EV battery plant in Turkey.
In February, Ford boosted its EV spend by $20 billion. That investment added to the $30 billion Ford already earmarked for electric vehicles through 2025. Those investments were followed by the separation of the company's EV and gas units. The reported reorganization will be led by former Apple and Tesla exec Doug Field.
The growing investments in the EV segment come amid soaring sales of Ford electric models. The company had to close orders for its hybrid 2022 Maverick pickup truck due to overwhelming demand. Orders for the 2023 Maverick will resume in the summer.
May Sales
Ford closed the gap on its monthly retail sales decline in May. Overall, Ford sold 154,461 total vehicles in the U.S. last month. That's a 4.5% decline from the previous year, as chip and other supply shortages weigh on production. Truck sales fell slightly by 1.5% year-over-year to 74,595 units. SUV sales also dipped 4% in the same period.
Ford's May numbers represent an improvement over April despite the continued chip shortage. The automaker led the auto industry in sales and reported a significant increase in market share. Those sales numbers were boosted by preorders for popular models like the Bronco and Maverick pickup models. Ford reported in a June 2 release that nearly half all retail sales came from previously placed orders. A year ago preorders totaled 9% of all retail sales.
Monthly EV sales totals also continued to climb to a record last month. Ford sold 6,254 EVs last month, a 222% increase over the previous year. The Mustang Mach-E model had beat its monthly sales record with 5,179 deliveries in May. The long-awaited F-150 Lightning also recorded its customer first sales at the end of May.
Ford and other automakers will release June U.S. sales soon. A big question going forward is whether chip shortages will finally ease.
Ford Earnings
Ford Q1 earnings fell 46% to 38 cents per share excluding items. Revenue also declined 5% from last year to $34.5 billion. The automaker saw net profit weighed down thanks to a loss in valuation of its stake in Rivian. Ford was an early backer of the EV startup and initially benefited from Rivian's IPO surge. But Rivian stock quickly conceded those gains and is down 70% on the year. Ford executives said that Apr. 27 earnings suffered mainly due to a mark-to-market loss of $5.4 billion on its Rivian investment. Ford stock edged up slightly after-hours.
Operating performance also continued to be hampered by production pauses due to the ongoing chip shortage and supply challenges. Whole shipments of vehicles decreased 9% from a year ago to 970,000 cars. That contributed to lower pretax profits in North America and other key markets, including Europe and China.
Ford maintained its outlook for the year despite a bumpy Q1. Executives anticipate a full-year 2022 adjusted EBIT of $11.5 billion to $12.5 billion, up 15% to 25% from last year. CEO Farley also hinted in an Apr. 27 earnings release that there would be changes ahead to make the company more profitable as competition heats up in the EV market.
"There are big things that we do extremely well, like turning out high-demand vehicles at scale," Farley said. "And others, in both existing and aspirational areas, where we need to improve — and will."
Electric F-150 Launch
Ford officially delivered its first electric pickup truck in late May, though it's unclear how quickly production and deliveries will ramp up. The F-150 Lightning model received 200,000 reservations when it was first announced last May. Ford held a Lightning production launch event on April 26.
The truck's initial $40,000 price tag has it set to vie with the Tesla Model 3 sedan which retails for $48,000. The Elon Musk-led car company will not begin producing its Cybertruck until at least 2023.
The F-150 Lightning launch is viewed as a pivotal moment in Ford's turnaround. The automaker has invested billions in its transition to electric vehicle production.
Last month, Ford said that it would split the company's EV business and gas-engine business in a major company reorganization. The Wall Street Journal reported that both operations will be kept in-house, "with separate names and their own leadership structures and profit-and-loss statements." Ford stock jumped on the news.
Ford's EV-focused business will now be called Ford Model E. The other division handling Ford's internal-combustion engine business will be known as Ford Blue.
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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 12 out of a best-possible 99. It remains far below the top tier of 90-plus-rated leaders, in terms of the most important fundamental and technical stock-picking criteria.
Ford stock has a weak EPS Rating of 20 out of 99. The rating compares quarterly and annual earnings-per-share growth with all other stocks. In the midst of transition, Ford has a spotty earnings track record. The company has reported more than its share of quarterly earnings declines over the past decade. However, estimates are pointing to growth.
IBD ranks the carmaker No. 13 among its automotive industry peers. The automakers group is No. 187 out of the 197 industry groups tracked by IBD. It's ideal to focus on top stocks found in the top 40 IBD groups.
Ford Stock Technical Analysis
Ford stock surged 140% in 2021, hitting a long-term high in early January. But shares have fallen significantly since then, hitting a 52-week low on June 17.
Consider Ford's Relative Strength
Ford's relative strength line — which measures a stock's price performance vs. the S&P 500 — has pulled back significantly after spiking higher to start 2022.
IBD's research shows the importance of focusing on stocks outperforming the market.
Ford Stock: A Buy Now?
Ford stock raced higher in 2021 and into the new year, but retreated sharply during the recent market correction.
Bottom line: Ford stock is not a buy now.
Shares are also still below a declining 50-day line, and resistance at that moving average coincides with those prior two peaks. Traders should first see if Ford stock can get back above, and hold above, its 50-day line before buying. Even then, the stock will have potential resistance at the 200-day line to contend with.
To find the best stocks to buy and watch, check out IBD's Stock Lists page. More stock ideas can be found on our Leaderboard and MarketSmith platforms.
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