What happened

Shares of Ford Motor (F 0.25%) gained last month as the automaker benefited from solid gains across the stock market, as inflation cooled off and expectations increased that the Federal Reserve would slow down interest rate hikes.

As a cyclical manufacturer, Ford is sensitive to interest rates and the economy, and rising rates have already brought down the price of used cars, making new cars less competitive.

Additionally, strong earnings reports from Tesla and GM gave the stock a boost as well. According to data from S&P Global Market Intelligence, the stock finished January up 16%.

So what

To kick off the month, Ford reported December U.S. sales up 3.2%, with truck sales up 10.9% to 101,649, showing demand remains strong. The company also said it increased its market share by 0.7 percentage points, and its electric vehicle (EV) sales grew at double the rate of the overall EV market.

Later in the month, the stock gained 3% on Jan. 23 on reports that it would cut up to 3,200 jobs in Europe as part of its pivot to electric vehicles and larger vehicles, which offer higher margins. Separately, it was also in talks to sell a German plant to Chinese EV company BYD, which would also free up cash for its pivot to EVs.

Towards the end of the month, on Jan. 30, the company followed Tesla and said it would cut prices on its Mustang Mach-E EV SUVs by up to $5,900 and significantly increase production. The stock sold off on the news as it seemed to be a response to an increasingly price-competitive environment. But Ford rebounded the following day after General Motors delivered a strong earnings report, as Ford's chief rival easily topped estimates and raised its guidance for 2023. 

Now what

Unfortunately, GM's earnings report didn't translate into a strong quarter for Ford as Ford stock fell 7.6% on Feb. 3 after its fourth-quarter earnings report came out. Revenue rose 17% to $44 billion, ahead of estimates at $40.4 billion. But on the bottom line, adjusted earnings per share jumped from $0.26 to $0.51, missing estimates at $0.62. CEO Jim Farley said the company left about $2 billion in profits in 2022 on the table due to poor execution. Looking to 2023, the company expects $9 billion to $11 billion in adjusted earnings before income and taxes (EBIT), which is slightly below the $10.4 billion in adjusted EBIT it reported in 2022. 

Over the long term, if the company can continue to make headway in EVs, the auto stock could have considerable room to run.