Ford Stock – Ford Stock Gets Two Thumbs Up
Stock in iconic U.S. auto maker
is on the move Thursday on a pair of positive data points.
One analyst upgraded the stock and another expects strong first-quarter numbers.
First, Wolfe Research analyst Rod Lache upgraded
stock to Buy from Hold. He believes Ford stock could re-rate like
(GM). Lache upped his price target for Ford to $15 a share from $13.
Rating, and re-rating, in this instance refers to the valuation multiple assigned to any company’s earnings. Traditional auto makers don’t trade at high price/earnings ratios because there hasn’t been a lot of growth in their earnings in recent years.
But things are looking better lately. The global economy is recovering, which helps car sales, but—more important for P/E ratios—a successful transition to battery-powered vehicles might provide Ford with a chance to grow earnings on a sustainable basis.
The market has embraced GM’s electric-vehicle plans, and the stock now trades at about 11 times estimated 2021 earnings. Over the past few years, GM stock has fetched only about six times estimated current-year earnings.
Ford stock is trading at about 10 times estimated 2021 earnings now, but it has also historically fetched a higher multiple than GM.
Earnings estimates might also be on the rise. Deutsche Bank analyst Emmanuel Rosner put Ford stock on his Catalyst Buy list Thursday. That’s the second positive data point.
Rosner’s list is for ideas he believes will rise soon because of a coming event. The event, this time, is earnings. “Favorable vehicle mix/pricing, combined with a robust product cycle, improved warranty performance, and restructuring savings could result in a large [first quarter] earnings beat,” Rosner wrote in a Thursday report. “The strength of Q1 could potentially enable management to maintain its [full year] earnings guidance despite intensifying headwinds from chip shortages.”
Microchip shortages have cause many auto makers, including Ford, to cut production. That is a headwind to earnings, but it has helped push up vehicle pricing.
Ford is due to report first-quarter earnings on April 28.
The setup for Ford stock looks promising, and Barron’s is bullish too. We recently wrote positively about the company, arguing that management could turn around Ford operations. Since that article appeared, Ford stock is up about 32%, more than twice the comparable gain of the S&P 500.
Year to date, both Ford and GM shares have gained about 36%.
Write to Al Root at [email protected]