Will a New CEO Help or Hurt Ford Motor?

With shares of Ford Motor (NYSE:F) trading around $17, 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 Motor 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 Chief Executive Officer Alan Mulally may be leaving the company earlier than had previously been expected as the company’s board is feeling more comfortable with the idea of Chief Operating Officer Mark Fields taking the position, Reuters reported. Mulally is widely credited with saving the automaker after the financial crisis of 2008 and wasn’t supposed to step down until the end of 2014. Sources told Reuters that now the board is giving Mulally the freedom to decide when he’d like to leave.

T = Technicals on the Stock Chart Are Strong

Ford Motor stock has been surging higher over the last year. The stock is now trading near highs not seen since early 2011. 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 slightly above its rising key averages which signal neutral to bullish 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

28.75%

63%

61%

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

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

As of today, 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 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 Mixed 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 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

15.38%

14.29%

-88.17%

0.00%

Revenue Growth (Y-O-Y)

14.71%

10.37%

5.34%

-2.65%

Earnings Reaction

2.53%

-0.22%

-4.64%

8.59%

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

P = Average 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

32.32%

26.57%

35.19%

393.50%

28.49%

Ford Motor has been an average relative performer, 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 may be losing its Chief Executive Officer sooner than expected. The stock has been surging over the last year and is now trading at highs not seen for a couple of years. Over the last four quarters, investors in the company have had mixed feelings as revenues have been rising while earnings have been mixed. Relative to its peers and sector, Ford Motor is an average year-to-date performer. Look for Ford Motor to OUTPERFORM.

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