Ford's Outlook May Be Too Optimistic, Analysts Say After Q4 Print

Ford Motor Company F's optimism for the coming year on the heels of its fourth-quarter earnings report was greeted with a strong bump on the market. Analysts expressed caution and even a bit of skepticism, saying questions linger about the American automaker’s turnaround.

Ford shares were up more than 4 percent at $8.68 at the time of publication Thursday. 

Ford’s reported Q4 earnings per share of 30 cents missed the consensus estimate by 2 cents, but what the sell-side took more note of was the company’s more upbeat tone in discussing 2019.

The automaker reported sales of $41.8 billion in the quarter, beating a $37.01-billion estimate. 

The Analysts

Morgan Stanley’s Adam Jonas has an Equal-weight rating on Ford with a price target of $10.

Bank of America Merrill Lynch’s John Murphy reiterated a Neutral rating on Ford with a price target of $11.

Morgan Stanley: Too Early To Turn Positive

Ford said it expects improved results in North America, Europe and China.

Morgan Stanley wants to be bullish on Ford, but is cautious, Jonas said in a Thursday note. 

While Morgan Stanley does see Ford as an emerging turnaround story, the analyst said there is a sense among some investors that potential negatives remain, such as a possible downgrade in its credit rating or a dividend cut.  

Jonas forecast greater losses in Europe and Asia Pacific and lower profit in North America than Ford foresees, and said that Ford’s target for improved auto earnings “is significantly more bullish than our forecast.”

“In short, while the ingredients are there, we think it’s too early to turn positive on Ford." 

BofA: Auto Earnings Expectations Too Optimistic

Murphy also took issue with Ford’s rosy expectation of year-over-year earnings improvement in North America, China and Europe, noting the company’s expectations for global industry volumes are more optimistic than BofA's. 

Murphy also acknowledged investor worries about Ford’s credit rating, saying that cash generation is challenged by underperformance on profitability and ongoing restructuring.

“It comes as no surprise (that there’s) increasing investor concern of a potential future credit rating downgrade, although we would emphasize the balance sheet appears solid at present." 

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Ford Executive Chairman Bill Ford, left, and CEO Jim Hackett. Photo by Dustin Blitchok.