Is Ford Motor Well-Positioned for the Future?

With shares of Ford Motor (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’s Fiesta compact is back in Japan despite failing a decade ago in a market dominated by Toyota and other powerful local brands that specialize in small cars. Japan Ford President Toshio Morita, unveiling the 2.29 million yen ($22,900) model Thursday, declined comment on trade barrier and currency manipulation allegations being voiced by Ford Motor Co. headquarters in Dearborn, Michigan, and other U.S. automakers. The complaint is that Toyota Motor Corp. and other Japanese manufacturers get an unfair advantage in selling their products in the U.S. while U.S. makers are denied equal access in Japan. Japanese automakers say they are competing fairly, but are relieved the dollar is strengthening as a result of aggressive Bank of Japan policies designed to weaken the yen.

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

26.68%

26%

23%

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 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 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

-69.00%

15.38%

14.29%

-88.17%

Revenue Growth (Y-O-Y)

11.84%

14.71%

10.37%

5.34%

Earnings Reaction

1.37%

2.53%

-0.22%

-4.64%

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

2.98%

-1.00%

-1.49%

-1.26%

-1.19%

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. The company’s Fiesta compact is back in Japan despite failing a decade ago. The stock has been trading sideways, but is currently surging higher. Over the past four quarters, earnings have been mixed while revenues are increasing, which has left investors with mixed feelings. 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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