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Better earnings at Ford may push the stock forward for years to come, an analyst says.
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Ford engine
stock picked up an upgrade to buy. Business execution is improving and Wall Street has yet to catch up with what is possible. It’s an opportunity.
Jefferies analyst Philippe Houchois reclassified
Ford
(ticker: F) pending buy stocks, Tuesday. Its price target rose from $13 to $16 per share.
Houchois came away from Ford’s May 22 investor event in Dearborn, Mich., with greater confidence in the company’s ability to “address an execution deficit that has plagued stocks for years.” Better execution should lead to better profits down the road.
Better business focus is one of the ways Ford plans to improve execution. Ford recently reorganized into three new business units: Model e, which is the company’s EV business; Ford Blue, which is the traditional gas-powered company; and Ford Pro, which is the business of the company.
Ford estimates the new operating structure can produce operating profit margins of 10% by 2026. Wall Street expects operating profit margins of about 6% in 2023, but forecasts profit margins of about 5% in 2026. No real improvement is expected, and this The gap is attractive for the Houchois.
“With more focused products, market exposure and reduced complexity, we find the roadmaps to improve returns across all three divisions credible,” the analyst wrote.
At Blue, Houchois notes that Ford plans to cut costs by billions a year. It expects the Model e to be close to breakeven by 2025. Ford expects to lose around $3 billion on the Model e in 2023. And for Ford Pro, the company is focusing on the selling software and services to fleet customers, which should bring in more and more. cyclical profits and profit margins.
The buy rating is moving Ford shares up about 4.9% in midday trading Tuesday at $12.68 per share. THE
S&P500
is up about 0.1%. THE
Dow Jones Industrial Average
is about 0.4%.
With Tuesday’s gains included, Ford’s market capitalization is about $2.8 billion higher than
General Motors
(GM). Ford’s cap overtook GM’s in early April. It’s rare. Ford’s market capitalization has only exceeded GM’s about 14% of the time over the past five years.
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(TSLA) helped Ford overtake GM last week when Ford announced Thursday evening that its electric vehicle drivers could use
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supercharger network in 2024. Ford stock gained 6.2% on Friday. Tesla stock gained 4.7% and GM stock gained 2.7%.
Overall, the street is still lukewarm on Ford shares with just under 40% of analysts covering the company’s Buy rating shares. The average buy rating ratio for S&P 500 stocks is around 53%.
At the start of 2023, just over 40% of analysts rated Ford stock as long. Rising interest rates and declining vehicle affordability have dampened some enthusiasm for equities.
The average analyst price target is around $13.70.
As of Tuesday’s open session, Ford stock is down about 12% over the past 12 months. The S&P 500 is up about 2% over the same period.
Write to Al Root at allen.root@dowjones.com