Will Recent News Send Ford Higher?

With shares of Ford (NYSE:F) trading around $15, 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 ended its calendar first quarter in China with a bang, as Chinese consumers bought 103,815 vehicles for the month of March, a 28 percent gain over the same period last year. It’s also the first time that Ford’s monthly Chinese sales have pierced the 100,000-unit marker, which is surely a celebratory accomplishment. For the first quarter, sales peaked at 271,321 vehicles, a 45 percent increase over the same three months of last year. “We’re pleased that China’s car buyers continue to choose Ford,” said John Lawler, chairman and CEO of Ford China, in the company’s statement. “Our strong sales momentum demonstrates the success of our accelerated China growth plan and puts Ford in a great position as we get ready to showcase our full product lineup at the Beijing Auto Show.”

T = Technicals on the Stock Chart Are Mixed

Ford Motor stock has struggled to make significant progress in recent times. The stock is currently pulling back 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 signals neutral price action in the near-term.

F

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

26.25%

86%

83%

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

May Options

Average

Average

June Options

Average

Average

As of WEdnesday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very significant 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?

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

85%

-69%

15.38%

14.29%

Revenue Growth (Y-O-Y)

3.58%

11.84%

14.71%

10.37%

Earnings Reaction

0%

1.37%

2.53%

-0.22%

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

2.69%

-17.3%

-12.2%

42.15%

4.83%

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. Chinese consumers bought 103,815 vehicles for the month of March, a 28 percent gain over the same period last year, making it the first time that Ford’s monthly Chinese sales have pierced the 100,000-unit marker. The stock has struggled to make significant progress and is currently pulling back. 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.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

More From Wall St. Cheat Sheet: