Morgan Stanley: Ford Looking Slightly More Stable Despite Global Headwinds

The Motor City auto show did hometown hero Ford Motor Company F a slight favor. Between its strong showing and preliminary 2018 results, the automaker saw sentiment pop over its 2019 bottom line.

The Rating

Morgan Stanley analysts Adam Jonas and Armintas Sinkevicius maintained an Equal-Weight rating on the stock with a $10 price target.

The Thesis

Here’s the good news. The analysts raised their 2019 bottom-line estimate from 83 cents to 85 cents. They forecasted positive free cash flow, a $2.5 billion Finco profit, as well as improvement in South America (which is still set to lose about $700 million).

The bad news is more extensive.

By Morgan Stanley’s account, both Asia Pacific and Europe are poised to extend their losses, with the latter market suffering lower volume, mix, prices, forex and raw materials. Among volume, mix, commodities and pricing headwinds in North America, Ford could suffer $800 million in negative prices to offset $950 million in cost savings.

Lost global market share and a 4-percent volume decline are seen to drive a 2.4 percent drop revenue.

Meanwhile, the analysts anticipate a halving of Ford’s dividend in the second quarter.

“We believe investors should wait for clearer execution, improved strategic transparency, or a dividend cut before wading in,” Jonas and Sinkevicius wrote in Wednesday's note.

Price Action

At time of publication, Ford shares traded down 2 percent at $8.32. The company is scheduled to release earnings after the bell.

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