Can Ford Continue to Surge Higher Post-Earnings?

With shares of Ford Motor Company (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 Motor Company today reported 2013 full year pre-tax profit of $8.6 billion, one of the company’s best years ever, driven by the highest Automotive pre-tax profit in more than a decade and continued solid profit from Ford Credit. “We had an outstanding year in 2013, demonstrating that our One Ford plan continues to drive solid results and profitable growth for all,” said Alan Mulally, Ford president and CEO. “We are well positioned for another solid year in 2014, as we continue our plan to serve customers in all markets around the world with a full family of vehicles — small, medium and large; cars, utilities and trucks — with the very best quality, fuel efficiency, safety, smart design, and value.”

T = Technicals on the Stock Chart Are Mixed

Ford Motor stock has been trading sideways over the past couple of months. However, the stock is currently surging higher and looks poised 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, Ford Motor is trading below its rising key averages which signal neutral to bearish 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

27.14%

23%

20%

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

Put IV Skew

Call IV Skew

February Options

Steep

Average

March 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 minimal 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 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)

85.00%

-69.00%

15.38%

14.29%

Revenue Growth (Y-O-Y)

3.58%

11.84%

14.71%

10.37%

Earnings Reaction

0.25%*

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.

* As of this writing

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

2.17%

-9.84%

-3.35%

15.36%

2.08%

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. The company reported fourth quarter earnings that left investors pleased. The stock has been trading sideways, but is currently surging higher. Over the past four quarters, earnings and revenues have been rising. Relative to its peers and sector, Ford has been a relative year-to-date performance leader. Look for Ford Motor to OUTPERFORM.

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