Market Overview

Here's Why Ford Stock Has More Upside Than You Think

Here's Why Ford Stock Has More Upside Than You Think
  • Shares of Ford Motor Company (NYSE: F) are higher by more than 11 percent from a year ago.
  • Joseph Amaturo of Buckingham Research sees further upside as he upgraded the stock to Buy from Neutral with a price target raised to $18 from a previous $15.
  • Amaturo noted Ford's accelerated earnings and cash flow growth will continue through at least the first half of 2016.

Shares of Ford have gained more than 11 percent over the past 52 weeks, but Joseph Amaturo of Buckingham Research Group sees a further 24 percent upside (including dividends) in the stock. The analyst upgraded the stock to Buy from Hold on Thursday with a price target boosted to $18 from a previous $15.

According to Amaturo, Ford is "best positioned" to take advantage of the "robust" full size pickup demand which is driven by a U.S. housing recovery and low gas prices. The analyst added that the stock currently does not reflect the company's "expected" and "sizable" improvement in North American profitability which will be driven by "significantly higher" F-Series volumes, and positive net pricing trends.

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Amaturo said that "most of the bad news" with respect to Ford's international segment is already discounted in the stock. Accordingly, a stabilization (or improvement) in the international segment would likely lead to upside valuation for the equity.

Amaturo further suggested four reasons to support his bullish stance:

1. Ford should see "meaningful" year-over-year improvements in its earnings per share in the second half of 2015 of 104 percent in the third quarter and 92 percent in the fourth quarter.

2. Ford's all aluminum F-Series is experiencing net-pricing increases of around $2,000 (after taking into account $1,000 in content costs) and volume of the truck should expand 26 percent year-over-year in the second half of 2015. The analyst argued that the higher volume will more than offset: 1) additional content costs for the F-Series, 2) the expected higher hourly wage costs, and 3) the deteriorating net-pricing for passenger cars.

3. As previously noted, expectations for the international segment are "muted" and any improvement in trends will be reflected by a higher valuation.

4. Ford is in a position to explore additional capital returns to shareholders in addition to maintaining its dividend given an expanding free cash flow and net cash position.

Bottom line, Ford's accelerated earnings and cash flow growth is expected to continue until at least the first half of 2016 and "now is finally the time to get more constructive" on the stock.

Latest Ratings for F

Nov 2020Morgan StanleyDowngradesOverweightEqual-Weight
Nov 2020UBSMaintainsNeutral
Nov 2020JefferiesMaintainsBuy

View More Analyst Ratings for F
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