JP Morgan Comments on Ford Motor Company

J.P. Morgan has published a report on Ford Motor Company F tweaking EPS predictions upward. In the report, J.P. Morgan wrote, "We tweak our H2.2011e EPS up on more favorable tax rate assumptions, partly offset by higher cost assumptions, but leave outer-year EPS unchanged. Ford's Q2 leads us to believe that its FY2011 annual total cost inflation targets ($4B for commodity and structural costs combined) are not as conservative as previously thought and that JPM's 2012e structural cost inflation assumptions (about one-half of 2011e's) may be on the optimistic side. Mgmt's tone suggested the co felt confident in its ability to prospectively price for content cost growth but not necessarily commodity cost growth. Ford alluded to positive but weaker pricing gains in H2 as industry inventories normalize, largely consistent with our previous thinking. Separately, balance sheet comments suggest a higher than previously thought likelihood of eventual share repurchase (2013 most likely, in our view). The stock is likely bottomed and should move up near term as SAAR rebounds in Aug and particularly in Sep/Oct. However, Ford equity is unlikely to attract a broad swath of sustained long-only interest until 2012 consensus expectations see greater capitulation – since the Q4.2010 major profit miss in late Jan-2011, Ford's 2012 consensus EPS have only drifted down $0.05 to $2.03 (vs. JPMe $1.75). Maintain Neutral with positive near-term trading bias." J.P. Morgan rated Ford Neutral with a price target of $19.00. Ford closed Tuesday at $12.94.