Bank Of America Back On Board With Ford, Sees Sustainable Earnings Inflection

Auto companies face a tough macro environment with regulatory targeting, trade pressure and a decline in personal vehicle ownership. But one analyst team has renewed faith in the market’s long-time underdog, Ford Motor Company F.

The Rating

Bank of America Merrill Lynch analysts led by John Murphy upgraded Ford to Buy and raised their price target from $13 to $14.

The Thesis

By the analysts’ assessment, the company is on the cusp of a sustainable earnings inflection point that should manifest more strongly in 2020. The attribute the turnaround in part to Ford’s product cadence, which includes a “favorable mix” of Escape, Explorer, Bronco and F-150.

“Combined with the company’s strategy to exit the passenger car segment, this product cadence bodes well for market share, mix/price, and profits in Ford’s North America business,” they wrote in a note.

Global restructuring efforts are also paying off. Bank of America expects additional announcements to give shape to the redesign strategy so far revealed piece by piece. Ford’s unique position is seen to help it thrive through a rough auto cycle.

“In the face of a tough cycle/macro, we believe this self-help turnaround story will start to get more credit among the investment community, and that improved execution and communication may allow Ford’s multiple to recover over time,” the analysts wrote.

Price Action

At time of publication, Ford shares traded up 1.5 percent at a rate of $10.35.

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