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Summary

  • Does Ford's stock have more room to the upside after a 5% gain today?
  • Struggling competitors, improving weather, and international sales should propel Ford's sales further.
  • Staying out of the negative coverage is by itself a positive for Ford as competitors recall in millions.

Ford Motor (NYSE:F) is up 5% today as of this writing as a result of March sales report. This article presents the positives that the stock had in March and how these factors could also have an impact on the stock's future. Let us get into the details.

Insider Purchase: Director John Lechleiter purchased 3,000 shares on March 10th according to filings. Granted, that is not the typical bulk purchase we see at these major corporations but it was only the 2nd insider purchase in almost two years. As Peter Lynch put it, insiders can sell for a variety of reasons but they buy for only one reason: they believe the stock is going up. As a comparison, the last insider purchase at General Motors Company (NYSE:GM) was back in November 2013.

March Sales: When the January 2014 and February 2014 sales were reported, one had to dig deep into the numbers to find out positives like encouraging Europe and China sales. But the March 2014 report on the other hand has positives written all over it, as Seeking Alpha has covered here. A strong March report was expected partly due to improving weather but Ford just blew it out of the park.

Here are the key highlights taken from Ford's website:

  • Overall March retail sales were the best in the last 8 years.
  • Ford Fusion sales reached their highest point since introduction in 2005.
  • The critical Ford F-Series once again had a strong month with YoY sales going up 5%.

Ford also continues to get strong approval ratings from consumers and dealers. While one might say March sales might just be a flash in the pan, the section below highlights why Ford's sales might actually continue improving.

Competitors: General Motors and Toyota Motors (NYSE:TM) have been recalling vehicles at a frenetic pace. This is a sensitive issue as there have been some lives lost due to the issues that led to the recall and this is also not to say that Ford will never have a recall. But General Motors and Toyota Motors are raking in recalls at a very quick pace. And the situation has become so critical that General Motors' CEO has had to testify about the recalls. Ford and its investors should not really be cheering this on humanitarian grounds. But just the fact that the major competitors are in the news for all the wrong reasons, could push Ford's sales up in the next few months.

Valuation:

  • In spite of today's 5% gain and General Motors' recent troubles, Ford is trading at a trailing P/E of 9 versus General Motors' 14.50.
  • Ford's earnings estimates for 2014 and 2015 have stayed fairly constant over the last 2 months, while General Motors' 2015 estimate has been slashed by 5% in the same period. The slash in GM's estimates supports the claim in this article that analysts perhaps were over optimistic with GM and way too pessimistic about Ford.
  • Based on 2015 EPS estimate of $1.91, Ford is trading at a multiple of 8.50 as of this writing.

Technical Breakout: As this article covered, Ford's stock has been in a narrow trading range for quite some time. But the recent positives for the stock has pushed it to almost $16.50, which augurs well from the technical stand point. As shown in the chart below, Ford had a real tough time breaking through the $15 area.

Another point to note is that Ford is breaking through the resistance area on huge volume. As of this writing, the trading volume stands at 64 million shares versus an average daily volume of 38 million.

(click to enlarge)

(Source: Yahoo Finance)

Technical Reason #2: Relative Strength Index [RSI] in the 50s and 60s are usually considered sweet spots by traders. Anything below 30 is considered "oversold" or "in a downtrend" depending on how you see it. Anything above 70 is seen as "overbought/in a strong uptrend."

Ford's RSI was in the 50s at the time of the last article and as we enter April, the RSI is getting into the 60s. In short, this stock is now seeing the momentum it has lacked for quite some time and should see more upward movement.

(click to enlarge)

(Source: Yahoo Finance)

Conclusion: Ford's improving numbers are not just a good sign for the company and its investors. It seems like an early positive sign that the U.S. economy is actually not doing as bad as feared. The February article linked above also highlighted the gaining strength in Europe and China, two key markets. Ford continues to be a long-term buy and is also hitting the sweet spot for momentum traders. Let us not forget the delicious 3% yield investors continue to get as the company strives for more growth.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Ford Motor: More Positives Going Into April