Should You Consider Ford Motor?

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.

Ford Motor Chief Executive Officer Alan Mulally, whose retirement is effective July 1, said he would also leave the company’s board but has not decided on his future plans. Mulally, 68, made his comments during a press conference at the company’s headquarters in Dearborn, Michigan, to announce his departure and the rise of Chief Operating Officer Mark Fields to CEO. Fields, 53, said he would make his primary focus the continuation of the “One Ford” plan established by Mulally. That plan calls for sharing of engineering and design of vehicles around the globe to improve quality and cut costs.

T = Technicals on the Stock Chart are Mixed

Ford Motor stock has struggled to make significant progress in recent times. 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 between its rising key averages which signal neutral price action in the near-term.

F

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

22.19%

3%

0%

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

Put IV Skew

Call IV Skew

June Options

Average

Average

July Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral 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)

86.40%

85%

-69%

15.38%

Revenue Growth (Y-O-Y)

3.67%

3.58%

11.84%

14.71%

Earnings Reaction

-3.30%

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), Tesla Motors (NASDAQ:TSLA), and sector?

Ford Motor

General Motors

Toyota Motor

Tesla Motors

Sector

Year-to-Date Return

3.95%

-14.20%

-10.10%

41.12%

6.19%

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. Chief Executive Officer Alan Mulally, whose retirement is effective July 1, said he would also leave the company’s board but has not decided on his future plans. The stock has struggled to make significant progress and 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.

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Earlier in the week, we had looked at one of Ford’s largest competitors using the same proprietary framework. Below is a recap of that analysis of General Motors:

T = Trends for a Stock’s Movement

General Motors designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers in daily rental car companies, commercial fleet customers, leasing companies, and governments.

The U.S. government lost $11.2-billion on its bailout of General Motors, more than the $10.3-billion the Treasury Department estimated when it sold its remaining GM shares in December, according to a government report released on Wednesday. The $11.2-billion loss includes a write-off in March of the government’s remaining $826-million investment in “old” GM, the quarterly report by a Treasury watchdog said. The U.S. bailout of GM and Chrysler, which received about $12.5-billion, saved 1.5 million jobs in the United States, according to the Center for Automotive Research. Last week, GM posted its 17th consecutive profitable quarter. Earnings, however, were hurt by a $1.3-billion charge for the costs of various recalls, including for faulty ignition switches on 2.6 million cars. GM is under investigation by the Justice Department, U.S. auto safety regulators and Congress over its failure to detect the faulty ignition switch for over a decade. The U.S. Securities and Exchange Commission is also investigating GM.

T = Technicals on the Stock Chart Are Mixed

General Motors stock has struggled to make positive progress in the past several years. However, the stock is currently surging higher and looks set to continue. 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, General Motors is trading below its rising key averages which signal neutral to bearish price action in the near-term.

GM

(Source: Thinkorswim)

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

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

General Motors options

27.53%

3%

0%

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

Put IV Skew

Call IV Skew

May Options

Steep

Average

June Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bearish 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 General Motors stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for General Motors 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)

-89.66%

5.56%

-49.44%

-16.67%

Revenue Growth (Y-O-Y)

1.44%

3.05%

3.72%

3.88%

Earnings Reaction

-0.63%

-0.02%

3.24%

-1.1%

General Motors has seen decreasing earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about General Motors recent earnings announcements

P = Weak Relative Performance Versus Peers and Sector

How has General Motors stock done relative to its peers, Ford Motor, Toyota Motor, Tesla Motors, and sector?

General Motors

Ford Motor

Toyota Motor

Tesla Motors

Sector

Year-to-Date Return

-15.70%

4.05%

-11.30%

36.20%

4.31%

General Motors has been a poor relative performer, year-to-date.

Conclusion

General Motors continues to change its business as it looks to entice companies and consumers with its new and improved vehicles. The U.S. government lost $11.2-billion on its bailout of General Motors. The stock has struggled to make positive progress in the past several years, but is currently surging higher. Over the last four quarters, earnings have been decreasing while revenues have been increasing, which has produced conflicting feelings among investors. Relative to its peers and sector, General Motors has been a poor year-to-date performer. WAIT AND SEE what General Motors does this quarter.

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