Autos

Is Ford Motor Poised to Head Higher?

With shares of Ford Motor 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 Motor will be buying back $1.8 billion worth of stock, or about 116 million shares, in order to help reduce the dilution caused by some recent stock grants to its executives and also to offset shares that may be issued to holders of convertible debt, Bloomberg reports. The stock popped on the news, hitting about $15.90, up 2.8 percent, by midday Thursday. The buyback will be concluded by the end of this year, according to the company. “These actions are consistent with our overall capital strategy to take anti-dilutive actions and position ourselves to further reduce Automotive debt,” Bob Shanks, Ford’s executive vice president and chief financial officer, said in a statement.

T = Technicals on the Stock Chart Are Mixed

Ford Motor stock has struggled to make significant progress in recent times. However, the stock is currently surging higher and looks set to continue this path. 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 between its rising key averages, which signals neutral price action in the near-term.

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

22.53%

3%

0%

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

Put IV Skew

Call IV Skew

June Options

Average

Average

July Options

Average

Average

As of Friday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a small 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 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?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

86.4%

85%

-69%

15.38%

Revenue Growth (Y-O-Y)

3.67%

3.58%

11.84%

14.71%

Earnings Reaction

-3.3%

0%

1.37%

2.53%

Ford Motor has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed 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 , Toyota Motor , and Tesla Motors  — and sector?

Ford Motor

General Motors

Toyota Motor

Tesla Motors

Sector

Year-to-Date Return

2.88%

-15.5%

-10.6%

20.54%

-1.67%

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 will be buying back $1.8 billion worth of stock, or about 116 million shares. The stock has struggled to make significant progress but is currently surging higher. Over the past four quarters, earnings and revenues have been rising. However, investors have had mixed feelings about recent earnings announcements. Relative to its peers and sector, Ford has been a relative year-to-date performance leader. Look for Ford to OUTPERFORM.

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.