Ford Has 28% Upside, Says Buckingham

• Ford Motor Company F shares have remained below the $16 mark since July 6, and have lost 6 percent over the last six months.
• Buckingham Research Group’s Joseph C. Amaturo maintained a Buy rating for the company, with a price target of $18.
• Fundamentals could improve in 2016, with volume growth and favorable net pricing trends, Amaturo stated.

The price target of $18 represents appreciation of around 28 percent from current levels, analyst Joseph Amaturo said. He believes Ford is the best positioned domestic OEM to post y/y growth in earnings, backed by its product cycle advantage with full size pickups and its modest international exposure.

Amaturo expects the fundamentals to improve for Ford in 2016. The F-Series could generate significant y/y earnings and automotive FCF growth, driven by considerable y/y volume growth through the first half of the year and very favorable net pricing trends.

The analyst also expects Europe to improve for Ford in 2016, while other international auto businesses may perform better than feared.

The relative share prices of Ford and General Motors Company GM [Rated: Neutral, PT $32] have exhibited high correlation over the past five years. “Furthermore, when the spread between the two would widen, shares eventually traded closer to parity and narrowed the gap,” Amaturo noted.

Based on this trend, the current price disparity between the shares of Ford and General Motors is expected to narrow, suggesting upside to Ford’s shares and downside to General Motors’ shares.

“[W]e would expect Ford to be considered among the most compelling OEM stocks after management issues financial targets by the end of January, 2016,” the report stated.