Is Ford a Buy After Earnings?

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 reported third-quarter results that beat estimates, and the Detroit automaker raised its full year outlook. Market stabilization in Europe in addition to Ford’s recent overhaul of its European operations caused Ford to lose less money in the region than the company had previously expected. For the first time in over two years, Ford saw a profit in its other overseas operations. These results are evidence that CEO Alan Mulally’s “One Ford” initiative is working. Earnings came in at 31 cents a share and revenue grew 12 percent to $36 billion.

T = Technicals on the Stock Chart Are Strong

Ford Motor stock has been rising in the last couple of years.The stock is currently trading near highs for the year. 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 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

26.42%

16%

14%

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

November Options

Flat

Average

December 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 minimal 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?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

12.50%

15.38%

14.29%

-88.17%

Revenue Growth (Y-O-Y)

12.15%

14.71%

10.37%

5.34%

Earnings Reaction

1.94%*

2.53%

-0.22%

-4.64%

Ford Motor has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Ford Motor’s recent earnings announcements.

* As of this writing

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

37.53%

24.00%

39.37%

403.20%

34.63%

Ford Motor has been an average performer, year-to-date.

Conclusion

Ford is a well-established vehicle products and services producer distributed in a multitude of countries across the globe. A recent earnings release has investors upbeat about the company. The stock has been rising in the last couple of years and is currently at highs for the year. Over the last four quarters, earnings and revenues have increased, which has produced conflicting feelings among investors. Relative to its peers and sector, Ford Motor has been an average year-to-date performer. Look for Ford Motor to OUTPERFORM.

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