Friday, September 22, 2023
Hometalking numbersWhy Ford shares could hit a speed bump

Why Ford shares could hit a speed bump

Ford CEO Alan Mulally has thrown water on rumors that he would leave the automaker for the top spot at Microsoft.

Mulally was hired by Ford after he was passed over for CEO of his old company, Boeing. He subsequently guided the company through tough times, including successfully navigating the company during the industry's crisis half a decade ago. Shares of Ford are up 85% since Mulally was named CEO in September 2006.

(Watch: Ford increases quarterly dividend by 25%)

While Ford's stock is up 16.5% over the past 12 months, shares lost nearly 8% of their value in the last two months. According to CNBC contributor Gina Sanchez, founder of Chantico Global, part of the recent drop in price was due to the potential loss of Mulally at the helm. However, Ford also had a few stumbles, particularly with its Ford Escape line.

"It was recalled seven different times," notes Sanchez. "That cost Ford $250 to $300 million."

Sanchez believes the nearly two dozen upcoming car launches expected in Ford's future are a reason to be positive on the stock in the long-run. As well, she is encouraged by the company's efforts to fund its pension obligations. It was underfunded by $18.7 billion in the begging of the 2013.

"They've made significant infusions into their pension," says Sanchez. "They've now closed the gap to about $10 billion. So, that takes down their future investments into their pension fund, from $2 to $3 billion down to $1 to $2 billion. That makes a huge difference."

(Read: Why CEO Mulally staying sets Ford up for big 2014)

Despite short-term difficulties like the Escape recall, Sanchez thinks Ford's future is bright.

"They're cash-rich," says Sanchez regarding the company's $14.7 billion in cash and equivalents on its balance sheet. "They have a low valuation. I actually think the long-term outlook for Ford is quite good."

For Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, the charts are saying to hold off on buying Ford's stock for the time being. Shares moves along an uptrend line starting in July 2012 only to end up moving sideways over the past six months. That indicates to Ross that the company's stock was being sold off. It recently broke below the uptrend line and the 200-day moving average for the first time in over a year.

"All of those are bearish technical data points," says Ross. "The longer-term trend remains higher but in the short-term, that's enough to keep me on the sidelines here and look for a better entry point at a lower level."

In the meantime, Ross suggests investors wait before buying Ford shares.

"I would not be adding to a long position in Ford right here," says Ross. "In fact, I might be taking some profits if I had them over the longer term."

To see the rest of Sanchez's fundamental look and Ross' charts on Ford, watch the video above.

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