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Ford Stock Breaks Out: More Pain Ahead?


Oct. 11 2019, Updated 10:58 a.m. ET

Ford Motor (F) stock has been falling since its second-quarter earnings. The stock has fallen 16.6% since July 24. The decline impacted Ford’s 50 DMA (day moving average), which has fallen 9.5%. Notably, the company’s 50 DMA has broken below the 200 DMA.

Currently, Ford’s 50 DMA is 1.7% below its 200 DMA. At the time of the company’s second-quarter earnings, its 50 DMA was 9.1% above its 200 DMA, which isn’t a good technical sign. The break below suggests that the stock’s fall could accelerate in the coming days.

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Is Ford stock in trouble?

Ford stock has been falling in the past few months due to a series of negative events. In the second quarter, Ford’s earnings fell short of analysts’ expectations. Also, the intensifying trade war between the US and China impacted the stock. Ford wants to make inroads in China through its restructuring plan—Ford China 2.0. Also, recession fears are denting Ford’s sales outlook. To add to the company’s woes, President Trump criticized Ford for its agreement with California on fuel standards.

Ford stock received a big hit due to its credit rating downgrade. In a surprising move, Moody’s downgraded Ford’s bond ratings to junk status. Moody’s thinks that the company’s restructuring plan and challenging market conditions could impact its earnings and cash flows.

The company’s auto sales volumes in the US fell 4.9%. The ongoing product portfolio revamping exercise in North America led to a decline in Ford’s car sales. Although the company’s truck sales rose, its total sales declined.

The fall in Ford’s US auto sales would have impacted its revenues and earnings in the North American region in the third quarter. Analysts expect Ford’s revenues to fall 2% YoY. They expect the company’s EPS to fall 10% YoY in the third quarter. If Ford’s financials fall short of analysts’ estimates, it could mean more pain for the stock.

Peers’ moving averages also breakout

A few days ago, General Motors’ 50 DMA broke below its 200 DMA. Now, the company’s 50 DMA is 0.8% below its 200 DMA. General Motors stock has fallen 15.2% since July 24.

General Motors’ troubles are getting compounded due to its labor strike. The UAW strike has entered its fourth week. The strike is impacting the company’s production and operations at its US, Mexico, and Canada facilities. Reportedly, the company is losing about $90 million per day due to the strike.

Also, General Motors’ sales in China have fallen 17.5% in the third quarter. The company’s third-quarter auto sales in the US fell short of analysts’ estimates.

Fiat Chrysler Automobiles (FCAU) is also in the same boat. The stock’s 50 DMA broke below its 200 DMA at the end of September. The company’s auto sales in the US were almost flat in the third quarter. Analysts expect the company to post a 4% YoY fall in its third-quarter earnings.

Tesla’s (TSLA) 50 DMA already broke below its 200 DMA in the first quarter. Recently, Tesla reported its third-quarter deliveries, which fell short of analysts’ estimates. Analysts expect Tesla to post a loss in the third quarter.

Fiat and Tesla stocks have fallen 9.7% and 7.6% since July 24.

To learn more about analysts’ opinions on leading auto companies, read Ford, Tesla, GM: Analysts Rank the Top Automakers.


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