Ford Motor Co. (NYSE: F) is set to meet with the financial community on Tuesday and its chart is at a critical juncture. As far as the news and company, Ford is actually a very cheap stock on many counts. It continues to pay down its debt, it has the best current name of the Big Three automakers in branding, and it still has a compelling story. It is fighting the market in general along with auto issues from Japan. The summer doldrums could also easily mute any good messages. Perhaps it really is Ford’s chart that tells it all…
Ford announced its best quarterly earnings in 13 years on April 26th and shares have fallen about 11% against about 4.5% for the S&P500 Index. Ford’s valuation is attractive at about 7-times forward earnings and about 7.25-times free cash flow. General Motors Company (NYSE: GM) hit a post-IPO low on Monday of $28.55 even if it trades just over 7-times expected earnings as well. Ask Joe Public which company has a better reputation today and it is likely the will say “Ford!” There is also just not even a comparison to the third of the Big Three whose name rhymes with Mice-ler.
Ford was also a winner when it comes to Toyota Motor Corporation (NYSE: TM) after the recall issue, but now all car makers have hit a snag since the earthquake and tsunami in March that took Japan offline. Those events seem to have impacted Japanese manufacturers more severely than Ford.
Ford’s prospects will play out against a backdrop of unfavorable industry factors that may easily postpone automotive buying decisions. Higher fuel prices, insufficient supplies, higher prices for auto components, and a falling confidence from Joe Public and weak economic data may all act as a drag for the time being. What we are keenly looking for from Alan Mulally is not more data about May, nor about the turnaround and how shares are up over 1,000% without government help. We are looking for a hint of better things to come. We want to hear if these automakers are starting to worry about a second recession.
For the recently reported monthly sales, May, 2011 had two fewer selling days than May, 2010. Ford’s monthly vehicle sales fell 0.1% from May, 2010 largely because of reduced sales to rental car fleets, while General Motors experienced a 1.2% drop. Among individual buyers, Ford realized a 4% increase in sales for May, 2011 and GM’s sales climbed 9%. Toyota monthly sales plummeted 27.9% versus May 2010, while Honda sales fell 16.1% and Nissan reported a 9.1% drop. In the face of the general industry slowdown, Chrysler reported an overall sales increase of 10%.
Our concern is not so much in valuation nor in what Alan Mulally’s future is. Mulally turned Ford around like a champion and the company is fiscally the best off of America’s Big Three (or Big Two). If you look at the data from Stockcharts.com, Ford shares are down more than 25% from their 52-week highs. At $13.91, the 52-week range is $9.75 to $18.97. More importantly, the 50-day and 200-day moving averages are $15.02 and $15.03 respectively. That 50-day moving average just crossed under the 200-day moving average as well… This is what some technicians now refer to as “the death cross.”
If Ford’s shares manage to pop and get above that key resistance then there could be another $1.00 upside before resistance comes into play again. The flip-side is that the close of $13.91 is the lowest close of the last three months and the absolute lows intra-day during the last three-months were $13.75 on an absolute basis on the Ides of March, $13.87 on March 11, $13.86 on Monday and $13.81 on Friday. In short, this stock chart has to hold up or Ford could easily see its stock challenging $13.00 again for the first time since last August.
Again, we are simply looking for what many economists call “Green Shoots” for any sign of a recovery or a halt of the bad news that we have seen in recent weeks. Ford’s financial community meeting takes place from 1:00 to 4:00 PM EST on Tuesday. More data may come out on Tuesday morning or it may not come out until right before the webcast takes place.
JON C. OGG
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