Ford Motor Company F reported mixed third-quarter results Wednesday, but that didn't stop investors form buying up the stock.
Shares closed higher by 9.9 percent at $8.99. That's the biggest move for the stock since Aug. 9, 2011, when shares jumped about 10 percent from $9.78 to $10.80.
Ford's stock hasn't closed in double-digit territory since Aug. 8, hurt by higher rates and tariffs. Here's what Street analysts are saying after the print.
The Analysts
- Buckingham Research Group's Joseph Amaturo maintains a Neutral rating on Ford with a price target lowered from $10 to $9.
- Morgan Stanley's Adam Jonas maintains at Equal-Weight; unchanged $10 price target.
- Jefferies' Philippe Houchois maintains at Buy; unchanged $13 price target.
Jefferies: Ford Delivered Where It 'Matters Most'
Ford reported multiple encouraging metrics in areas where it "matters most," Houchois said in a note. They include:
- EBIT 10 percent ahead of consensus estimates.
- Three-percent revenue growth to $37.7 billion.
- A slight EPS beat at 27 cents.
- Strong performance in North America despite negative net pricing, along with higher commodity and warranty costs.
- A solid contribution from the credit side of the business.
Several poor metrics that Ford reported were anticipated, including weak performance in Europe and a "low point" in China, the analyst said.
Ford impressed in areas where it mattered most against "low and falling" expectations, which warrants a bullish stance on the stock, according to Jefferies.
Buckingham's Concerns Over Cost Cutting
Several aspects of Ford's third-quarter report were a welcome surprise, including an 8.8-percent EBIT margin in the North American business, while the Ford Motor Credit Co. showed a strong profit that prompted a $600-million quarterly dividend from the subsidiary, Amaturo said in a note.
Ford's free cash flow would have been negative $500 million excluding the dividend, which warrants a cautious stance toward the quality of accrual earnings, the analyst said.
Ford didn't offer any specific details regarding its cost-cutting and restructuring initiatives, Amaturo said. The company plans on saving $36 billion over time, but the absence of any new color warrants a cautious stance, he said.
Morgan Stanley: 'Some Relief'
Ford's report offers investors "some relief" and should ease negative sentiment and declining expectations, Jonas said in a note. The results come at a time when Ford continues to create new partnerships, finalize restructuring initiatives and generate new value-enhancing ideas, he said.
The stock's upside reaction Thursday shouldn't come as a surprise, although it should not be considered "the big inflection" point to support continued upside, the analyst said. Ford's balance sheet is "holding together" and the nearly 7-percent dividend yield appears to be safe, Jonas said.
Related Links:
What China Means For Ford And Tesla
7 Reasons Morgan Stanley Pulled Back On Ford
Photo courtesy of Ford.
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