Barclays Turns Bullish On Ford, Removes Underweight Rating From Fiat Chrysler

Referring to border taxes, Barclays’ Brian Johnson said in a report that Ford Motor Company (NYSE:F) seems better positioned than General Motors Company (NYSE:GM) and Fiat Chrysler Automobiles NV (NYSE:FCAU) in a border adjustment scenario.

Johnson believes the border adjustment scenario is still “significantly underappreciated by the market.”

Relative Positioning

Johnson upgraded the rating on Ford to Overweight, while raising the price target to $15. He commented that the company’s “relative advantage” in a border adjustment scenario could imply upside of 13 percent to 2018 EPS. He maintains an Equal-Weight Rating on General Motors, with 4 percent risk to 2018 EPS.

Fiat Chrysler seemed to be the worst positioned, with 57 percent risk to 2018 EPS. The analyst added, however, that an extended US cycle reduces risk. The rating on the company was upgraded from Underweight to Equal Weight, with the price target raised to €10.

Although Ford has a higher mix of North America unit production in the United States than either General Motors or Fiat Chrysler, “the starker difference lies in the estimated value of U.S. net imports,” Johnson wrote. He estimated only $3.6 billion for Ford, versus $10.4 billion for General Motors and $18 billion for Fiat Chrysler.

“Ford is largely importing low-value small/mid cars from Mexico, vs. FCA and GM, which manufacture high-value pickups in Mexico and CUVs/minivans in Canada,” the analyst noted.

Ford also enjoys potential U.S. market share and/or pricing benefits, with 77 percent of its vehicles sold in the United States being assembled in the country, which is ahead of the industry average of 56 percent.