Will Ford Motor Make All-Time Highs This Year?

With shares of Ford Motor (NYSE:F) trading around $16, is F an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Ford is a producer of cars and trucks. The company also engages in other businesses, such as financing vehicles. Ford operates in two sectors: automotive and financial services. Through its sectors, Ford provides a wide range of vehicles, vehicle parts, and services to a multitude of consumers and companies worldwide. The company’s products saw declining demand in the past several years as gasoline prices took a major toll on pockets. Ford is now revolutionizing its vehicles in order to compete on the world stage. Look for Ford to fuel a recovery in the American automobile industry and provide highly demanded vehicles, parts, and services.

The term “there just aren’t enough hours in a day” doesn’t seem to apply to Ford, at least for a 24-hour span on June 19, when the Dearborn, Michigan-based automaker opened 88 new dealerships in China as part of a push to lay out a larger footprint in the region amid soaring sales and prior to its debut of the Lincoln brand. In the country, Ford now boasts 750 dealership locations, a number that’s assured to keep moving north as long as Ford continues posting the types of double-digit gains that it has been in the region, which has become the world’s largest market for automobiles. Sales in May leapt 32 percent to 93,323 wholesales. To date, Ford’s Chinese sales are up 39 percent.

T = Technicals on the Stock Chart Are Strong

Ford Motor stock has been moving higher over the past couple of quarters. However, the stock is currently trading sideways and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Ford Motor is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Ford Motor options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Ford Motor options

20.28%

80%

78%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of Monday, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Ford Motor’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Ford Motor look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

86.4%

85%

-69%

15.38%

Revenue Growth (Y-O-Y)

3.67%

3.58%

11.84%

14.71%

Earnings Reaction

-3.3%

0%

1.37%

2.53%

Ford Motor has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Ford Motor’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Ford Motor stock done relative to its peers – General Motors (NYSE:GM), Toyota Motor (NYSE:TM), and Tesla Motors (NASDAQ:TSLA) — and sector?

Ford Motor

General Motors

Toyota Motor

Tesla Motors

Sector

Year-to-Date Return

9.24%

-10.3%

-3.93%

58.08%

-2.66%

Ford Motor has been a relative performance leader, year-to-date.

Conclusion

Ford is a well-established vehicle products and services producer distributed in a multitude of countries across the globe. On June 19, the automaker opened up 88 new dealerships in China as part of a push to lay out a larger footprint in the region amid soaring sales and prior to its debut of the Lincoln brand. The stock has been moving higher over the past couple of quarters but is currently trading sideways. Over the past four quarters, earnings and revenues have been rising, which has left investors pleased. Relative to its peers and sector, Ford has been a relative year-to-date performance leader. Look for Ford to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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