Will Ford See Rising Prices?

With shares of Ford Motor Co. (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 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.

Investors in Microsoft (NASDAQ:MSFT) have apparently named their top picks to replace Steve Ballmer as CEO, and Ford’s (NYSE:F) Alan Mulally and Computer Sciences (NYSE:CS) head Mike Lawrie are at the top of the list, according to sources who spoke to Reuters. A special committee of the company’s board are combing through a list of around 40 candidates inside and outside the company, and they hope to find Ballmer’s replacement by the end of the year.

T = Technicals on the Stock Chart Are Strong

Ford stock has been coasting higher over the past several months. The stock is currently trading near highs for the year 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 is trading above its rising key averages, which signals neutral to bullish price action in the near term.

F

Source: Thinkorswim

Taking a look at the implied volatility 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

27.80%

36%

33%

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

October Options

Flat

Average

November Options

Flat

Average

As of Tuesday, there is 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.

E = Earnings Are Improving 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 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 has seen improving earnings and revenue figures over the past four quarters. From these numbers, the markets have expected a little more from Ford’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

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

Ford

General Motors Co.

Toyota Motor Corp.

Tesla Motors

Sector

Year-to-Date Return

36.06%

29.17%

36.60%

392.10%

33.29%

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. As the current CEO, Alan Mulally, prepares to leave, Microsoft may be planning on hiring him as its CEO. The stock has been rising higher in recent years and is now trading at highs for the year. Over the past four quarters, investors in the company have expected a little more. However, earnings and revenue figures have been improving. Relative to its peers and sector, Ford has been an year-to-date average performer. Look for Ford Motor to OUTPERFORM.

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