Is Ford Motor Well-Positioned for the Future?

With shares of Ford Motor (NYSE:F) trading around $16, 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 will be investing $150 million into its plant in Buffalo, New York, in the stamping facility that is slated to make parts for the next-generation Edge crossover. The Detroit News reports that the money will buy 25 new sub-assembly stations to produce hoods, doors, and fenders, and more than 500 new dies plus equipment upgrades. The Buffalo plant, which opened in 1950, will see about 350 new jobs, hiking the plant’s total employment to about 1,000.

T = Technicals on the Stock Chart Are Mixed

Ford stock has been coasting higher over the past several months. The stock is currently trading sideways 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 is trading between its rising key averages, which signal 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 options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Ford Options

24.78%

20%

18%

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

December Options

Average

Average

January Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal 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 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’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Ford 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 has seen mixed earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have been optimistic about Ford’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Ford stock done relative to its peers, General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Tesla Motors (NASDAQ:TSLA), and sector?

Ford

General Motors

Toyota Motor

Tesla Motors

Sector

Year-to-Date Return

30.35%

30.71%

34.02%

255.80%

32.69%

Ford 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 will be investing $150 million into its plant in Buffalo, New York, in the stamping facility that is slated to make parts for the next-generation Edge crossover. The stock has been rising higher in recent years and is now trading sideways. Over the past four quarters, earnings have been mixed while revenues are increasing which has left investors optimistic about recent earnings announcements. Relative to its peers and sector, Ford has been an year-to-date average performer. WAIT AND SEE what Ford Motor does this quarter.

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.