Ford Reports Solid Earnings But Lowers Guidance

Ford Motor Company (Ticker Symbol: F) reported better than expected earnings but lowered its guidance for the rest of the year as the company remains uncertain about international demand especially coming from China. The Dearborn, Michigan based company reported an earnings per share beat of .34 cents per share vs. Wall Street analysts’ expectations of .26 cents per share. The automaking giant reported a slight revenue miss of $33.93 billion vs. $33.98 billion that Wall Street analysts’ were expecting.

Ford gave an update on its guidance for the year and now expects to make less profit than previously for the year. The automaker is now calling for its earnings guidance to be between $1.20 and $1.32 per share, which was slightly lower than its previous range of $1.20-$1.35 per share.

Earlier this year, Ford cut roughly 10% of its workforce as part of an $11 billion restructuring plan that will save the company upwards of $600 million annually. The company is now focusing on its production of trucks and SUV’s and the new plan will save them money to invest further in electric and autonomous vehicles.

The above image is a long term monthly chart of Ford’s stock price over the past two decades. Ford’s stock had a very steep rally from 1997 through 2000 trading to an all-time high of $37.41 on April 19, 1999. The stock then spent the next year trading in a descending triangle pattern. A descending triangle is where the bottom part of the triangle appears flat and the top part of the triangle has a downward slant. Buyers come in at the lows, and prices move higher up. Prices make a lower high, which brings in more sellers and the market heads back to old lows. Ford broke out of this pattern to the downside in the third quarter of 2001 and continued to trade lower until the Federal Reserve’s announced the beginning of its quantitative easing policy, which gave the stock a new life in 2009.

Ford’s stock found a bottom in 2009 around the $1.50 price level. The stock proceeded to rally over 1000% finding resistance just under the $20.00 price level. Ford found some dynamic price support at its 100-month moving average twice in 2011 while forming a double bottom reversal pattern. This occurs when the price of an asset reaches a low price, has a small rally, then retests that low failing to break below it. The pattern is confirmed once it breaks above the high between the two prior lows. Ford broke from that pattern to the upside and found resistance again just under the $20.00 price level. The stock has pulled back nearly 50% since then and has been gradually grinding lower. Currently, Ford is positive for the year but is trading below both its 100 and 200-day moving averages.

(Chart above courtesy of ​​ )

Based on a survey of 7 analysts offering 12-month price targets, the average price target for Ford’s stock is $10.75. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $8.59.

Investors in the automobile space should look to Ford’s competitor General Motors’ (Ticker Symbol: GM) earnings release on October 29th for fresh news within the sector.


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