Ford: Running on Empty?

| About: Ford Motor (F)

Ford Motor (NYSE:F) (11.44) reported solid fourth quarter earnings Thursday morning. The automaker posted .43 per share in the 4Q, which was .17 better than analysts projected. Revenues also were 22% higher in this past quarter compared to the same quarter in 2008 as the company raked in $35.4 billion. The company highlighted its return to profitability and talked up its positive operating-related cash flow.

Despite the glowing financial report, the stock barely idled, finishing out the day in the red.

What happened?

I believe investors are now looking for more. Like most stocks the past year, F has risen too far too fast. Consider that F was selling for a buck and change last year at this time. It appears the stock is now priced to perfection.

The company’s recent performance can be attributed to seasonal factors, which included one time tax refunds and the rebuilding of dealer inventory from rock bottom levels created during the recession. I am certain the company won’t have these favorable conditions to carry it through the rest of 2010.

Another key to the earnings beat is the carmaker’s reducing automotive structural costs for the full year by $5.1 billion. This capped off four years of automotive structural cost reductions. Great news except that management was quick to point out that these same structural costs will increase this year as production increases. So, will the company keep costs in line with operations?

To me this is one of the most important takeaways in the entire conference call (see transcript here). I see this as a foreboding sign of what is to come for the stock and company in the near term. Production aside, I think the company has very little waste to cut.

Inability to control costs was what got F and all the other American car manufacturers into trouble. I am not certain F will have a handle on this in 2010.

Combine the impending structural cost increases with the cautious global economic outlook given by management in today’s earnings call and F appears to be running out of gas. We recommend a sell rating with a near term price target of $10.

Disclosure: Short F