J.P. Morgan Raises Estimates on Ford; Reiterates Neutral Rating (F)

J.P. Morgan is out with a research report this morning, where it reiterates its Neutral rating on Ford Motor Company F; it has a $16.00 price target on the stock. The JPM analysts cited five key takeaways for the company’s conference call: (1) “In FY2010, Ford now expects a $1B global increase in each structural and commodity costs. (2) FMC profits now expected to be up in 2010 (not surprising) but are still expected to fall in 2011 on non-repeat of lease residual gains (although reductions in credit loss reserves could continue into 2011 in our view). (3) Ford implied that its current penetration with subprime customers was at a level with which it was comfortable (i.e., not evident Ford wanted to increase this notably). (4) NA’s 11.2% Q2 margin was characterized as a level that was peak-ish. (5) Ford made a scripted comment on taxes aimed at reminding investors that a sustained period of profitability (primarily in the US) would lead it to remove its currently-in-place valuation allowance on its global net deferred tax assets of roughly $17B. We suspect this will happen in the next 12 months – such a move would raise Ford’s effective global tax rate to a typical rate (say from ~15% as per JPM model to around ~30% globally – hurting EPS by about 30 cents), although its currently low cash tax rates will remain unchanged probably for another 5-7 years in our view.” The analysts added, “We adjust our 2010e EPS higher to $2.00 (vs. $1.60 earlier) and 2011e EPS to $2.00 (from $1.60 earlier) driven by 2Q beat partially offset by higher structural/commodity costs in Auto division. We also raise out 2010 and 2011 FMC forecasts notably. 2012e EPS is revised higher to $2.10 (vs. $1.85 earlier).”