Ford's Bad News Has Been Sufficiently Priced In Over Last 6 Months

Jefferies has upgraded Ford Motor Company F to Hold from Underperform, saying the automaker’s “bad news has been more than dissected in the last six months and sufficiently priced-in.”

Despite acknowledging cyclical risks, analyst Philippe Houchois noted that Ford’s earnings would benefit the most among the "Detroit Three" from infrastructure spending, border adjusted tax reform and exposure to a Russian auto recovery.

Beyond The Borders

Ford's above average exposure to light and medium duty work vehicles, most of them sourced in the United States, which bodes well in an environment of infrastructure spending. Unlike General Motors Company GM, Ford also retained exposure to Russia, which should help Ford Europe this year.

On the border adjustment tax front, the analyst estimates Ford has the lowest risk among U.S. exposed OEMs with 80 percent of US sales volume sourced domestically and U.S. exports/imports balancing out in value.

“We estimate a cost penalty <$500 per vehicle vs estimated $2,000 industry average,” Houchois elaborated.

Other Companies

Earlier this month, Barclays’ Brian Johnson too upgraded Ford, saying the automaker seems better positioned than GM and Fiat Chrysler Automobiles NV FCAU in a border adjusted tax scenario.

Meanwhile, Ford shares have under-performed sector and GM by 15 percent in 2016, with. 2017 consensus EPS estimates falling 23 percent since June.

“Ford's challenges are sufficiently priced-in and risk is slowly moving to the upside,” Houchois added.

Shares of Ford closed Thursday’s trading at $12.38. Houchois raised his price target by $2 to $12.