Ford Needs a Tune-Up

NEW YORK ( TheStreet) -- Ford Motor ( F) really needs a tune-up.

While the analysts keep giving it high marks, the public is bailing as the stock falls and short interest is starting to climb again back up to three-days coverage.

It's time to watch this one and try to buy at the bottom just before the shorts have to bail. In the last month the stock has continued to drop, as evidenced by this hourly trading chart provided by Barchart:

I know a lot of you are going to point out that the market is down also, but in the last six months the market as measured by the Value Line Index was down 7% while Ford dropped almost 28%:

Let's look at the numbers and the analysts' projections before making up a plan.

Ford engages in the development, manufacture, distribution, and service of vehicles and related parts worldwide. The company operates through two sectors, Automotive and Financial Services.

The automotive sector offers vehicles primarily under the Ford and Lincoln brand names. This sector markets cars, trucks and parts through retail dealers in North America, and through distributors and dealers outside North America. It also sells cars and trucks to dealers for sale to fleet customers including daily rental car companies, commercial fleet customers, leasing companies and governments.

In addition, this sector provides various after-sale vehicle services and products to retail customers such as maintenance and light repair, heavy repair, collision repair, vehicle accessories and extended service contracts under the Ford Service, Lincoln Service, Ford Custom Accessories, Ford Extended Service Plan, and Motorcraft brand names.

The Financial Services sector offers various automotive financing products to and through automotive dealers. It provides retail financing, which include retail installment contracts for new and used vehicles; direct financing leases to retail customers, government entities, daily rental car companies, and fleet customers; wholesale financing that comprise loans to dealers to finance the purchase of vehicle inventory; and loans to dealers to finance working capital, purchase dealership real estate, and/or make improvements to dealership facilities, as well as offers insurance services.

Ford was founded in 1903 and is based in Dearborn, Mich. (Yahoo Finance profile)

Factors to Consider:

Barchart technical indicators:
  • 96% Barchart technical sell signal
  • Trend Spotter sell signal
  • Below its 20-, 50- and 100-day moving averages
  • Lost 9.49% in the last month
  • Lost 24% in the last quarter
  • 30.57% off its one-year high
  • Relative Strength Index 32.62
  • Recently traded at 9.02, which is below its 50-day moving average of 9.95
  • Fundamental Factors:
  • Wall Street is high on the stock; 13 brokerage firms have assigned 20 analysts to churn out reports
  • Analysts project revenue will be down 0.2% this year but up 6.5% next year
  • Earnings are estimated to be down 12.6% this year but turn around and increase by 18.9% next year and continue to increase annually by a rate of 10.45% for the next five years
  • Even though these numbers do not impress me, Wall Street has given five strong buy, eight buy, seven hold and no sell or under perform recommendations to their clients
  • They project that investors at this level will see an annual total rate of return in the 24% to 28% range over the next five years
  • P/E is 5.33, which is a big discount to the market P/E of 14.6
  • The dividend rate is 2.21% but is only 10% of projected earnings and just slightly below the market dividend rate of 2.4%
  • The balance sheet is rated B
  • The good news is North American revenue and earnings are increasing
  • The bad news is foreign sales account for 41% of revenue and are also subject to currency fluctuations
  • Revenue is weakening in European markets as the recession continues
  • South American and Asian sales look promising
  • Competition for new auto sales is stiff but the whole industry is having problems.

    Over the past year while Ford was down 31%, Toyota ( TM) was down 14%, Honda ( HMC) down 25% and General Motors ( GM) off a whopping 36%:

    The competitions' projection by analysts:

  • Revenue projected to increase by 11.8% this year and 10.2% next year
  • Earnings to increase by 202.6% this year and 12.9% next year
  • Honda
  • Revenue projected to increase by 13.5% this year and 20.1% next year
  • Earnings to increase by 162.2% this year and 12% next year
  • General Motors
  • Revenue projected to increase by 2.7% this year and 6.8% next year
  • Earnings estimated to be down 17.5% this year but increase by 29.4% next year
  • Conclusion: Ford is definitely in need of a tune-up. The investors are presently bailing and the short interest sharks are moving in.

    There are bleak numbers projections being made by analysts but they also see the P/E of 5.33, which is a big discount to the market, as too good to pass up.

    Those of you holding this stock or buying today may have to hold it for a long time to see a profit. My advice is to watch the 14-day turtle channel and the moving averages to signal a bottom.

    You will have to be nimble to buy in fast because the short interests will panic and run for cover. Be careful on this issue.

    This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.