Ford CEO Mark Fields Zips Investors Past GM to a Near-Term Buy

NEW YORK (TheStreet) -- Ford (F) is a company in a positive transition to growth. Like its beleaguered rival General Motors (GM), Ford is perceived by Wall Street as a "glass half full." Ford stock closed Wednesday at $17.43, up 1.87% for the day and up nearly 13% year to date. GM, on the other hand, is down 7.1% year to date, and closed at $37.97.

Ford's unit sales for June fell 5.8%. But because analysts were anticipating a larger 6.6% drop, the news was perceived as good. Then there's the new CEO of Ford, Mark Fields, and his relatively modest starting compensation package -- which is loaded with incentives to bring his company success.

With some CEOs earning $30 million per year, Fields' annual salary of $1.75 million looks modest. In fact it's $250,000 less than his predecessor Alan Mulally. But again, Wall Street is upbeat.

10 Cars That Retain Resale Value After 5 Years

Grading Sobek's Mid-Year Biotech Stock Predictions

Apple Becomes the Top Momentum Stock as Tesla Hits the Brakes

Yahoo!'s Alibaba Cash Could Trigger a Buying Binge in Tech

Details in a recent filing reveal the CEO of the second-largest U.S. auto maker will receive a grant of 710,227 stock options, which exercise at $17.21. There's also a performance bonus of up to 200% of his salary, adding another $3.5 million that Fields can earn for himself.

So clearly Ford's leader has generous incentives to make his company's customers and shareholders happy. This includes a back-ended cache of restricted stock grants, which when vested may be worth more than $5.25 million.

These performance inducements are dependent on Ford's stock moving higher. With a forward 1-year price-to-earnings ratio of 9, shares looks inexpensive compared to Tesla Motors' (TSLA) forward-P/E of nearly 71.

By the way, Ford has an electric car for sale that costs only $36,000. Powered by a lithium-ion battery, the 2014 Ford Focus Electric has an EPA-estimated rating of 110 city MPG. Demand will likely exceed supply.

Have you driven or seen the 2014 Ford lineup? In my opinion it's their best looking array of cars and trucks yet and will goose sales in the last two quarters of 2014.

The company is planning to unveil many new models this fall, including its all-aluminum F-150 truck with upgraded engine technology. Ford realizes many buyers are waiting to buy it, which creates an impetus to speed up production and accelerate deliveries.

Ford's strong financial results the past two years allowed it to increase quarterly dividends by 100% in 2013 and another 25% in the first quarter of 2014. At a share price of $17.40 the dividend yield is 2.9%.

With this momentum, is Ford still a buy? Let's look at the data.

Shares of Ford are up nearly 13% year-to-date, and 10% in just the last 3 months. This momentum, illustrated in the chart below, is one indicator that shareholders may experience more of the same going forward. That depends on some key factors.

F Chart

F data by YCharts

During the first quarter of 2014, Ford's net income fell sharply. Quarterly retained earnings growth fell from above 30% to 23.77%. That's not too troubling, but to sustain the leap in the stock's price, the company will need to produce improved numbers when it reports second quarter results on July 24.

Hope for this surfaced July 9, when Ford announced a 6.6% year-over-year increase during June for auto sales in Europe. This was in sync with its intentions to become profitable again in Europe and maintained its schedule to accomplish this by late 2015.

Here's What It Looks Like Inside Tesla's Massive Factory

Here's What It's Like to Work for Elon Musk

The company's pretax operating loss in Europe narrowed to $194 million in the first quarter, from a loss of $425 million in the year-ago quarter. These results bode well for further progress not only in Europe but in other markets like South America and China.

Considering how high shares of Ford climbed in the last 3 months, investors may choose to wait before buying a full allocation.

My sense is to look for a pullback, and with luck, a 4% correction creates a buying opportunity near the June 23 low of $16.68.

At the time of publication the author positions in F and GM.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Google+

Marc Courtenay is a financial research analyst and the founder of Advanced Investor Technologies LLC as well as the publisher and editor of www.ChecktheMarkets.com.

More from Opinion

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks