Morgan Stanley: Majority Of Ford's $63-Billion Pickup Business Tied To Commercial End Markets

Ford Motor Company F’s exposure to the pickup truck market might be underappreciated by investors, according to Morgan Stanley.

The Analyst

Analyst Adam Jonas upgraded Ford last week and said its truck business alone is worth more than Ford's entire enterprise value. In a Wednesday update, Jonas detailed the importance of the F-series to Ford's business model. Morgan Stanley maintains an Overweight rating on Ford with a $15 price target. 

The Thesis

Morgan Stanley values Ford’s F-Series pickup business at $63 billion, or roughly 150 percent of Ford’s enterprise value.

Commercial end markets drive 60-70 percent of U.S. pickup truck demand, leaving Ford highly leveraged to the U.S. commercial investment cycle, Jonas said. 

Morgan Stanley estimates that 25 percent of the truck business is driven by housing; 20 percent by nonresidential construction; and 10 percent by energy and mining, with the remaining demand coming from agriculture, government, small business and other customers. 

The F-150 is the best-selling vehicle in 22 states, meaning a 10-percent move in F-Series volume could translate to a 20-percent movement in Ford’s 2018 EPS, Jonas said. 

Price Action

Ford shares were up 0.86 percent at $11.10 at the close Wednesday.

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