Goldman Sachs Upgrades Ford To Buy, Restructuring Plan Yields Favorable Opportunities

With all eyes on the autonomy programs of General Motors Company GM and Tesla Inc TSLA, Ford Motor Company F often seems the auto industry’s forgotten child. One investor thinks it's time to show a little appreciation.

The Rating

Goldman Sachs analyst David Tamberrino upgraded Ford to Buy and raised his price target from $9 to $12.

The Thesis

The analyst anticipates positive reception of any incremental announcements around Ford, particularly as Street sentiment continues to favor GM.

Additionally, he forecasts product launches in lagging key markets to catalyze positive earnings inflections in North America and China beyond 2019, with 12-percent of the firm’s $2.5 billion of initiatives driving bottom-line growth.

“While we still expect a downward earnings trajectory into 2019 (North America profit under-pressure), we believe next year will represent trough earnings and the combination of a refreshed product cadence globally as well as cost improvements from strategic initiatives will begin to take hold,” Tamberrino wrote in a note. “We believe Ford can put itself on a pathway to earnings that are above normalized EPS by 2021.”

Goldman Sachs maintains expectations for a regular dividend and sees Ford’s $7 billion, five-year cash restructuring plan driving $2 billion to $3 billion in free-cash-flow and earnings-before-interest-and-tax improvements.

Price Action

At time of publication, shares were trading up 5.8 percent to $9.50.

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