Buckingham Sees 40% Upside For Ford, Says Guidance Is Conservative

Ford Motor Company F received a Buy rating with a price target of $18 by Buckingham Research Group on Wednesday.

Despite Ford experiencing a record number of car sales, shares of Ford have fallen 5.79 percent over the past month.

"We reiterate our BUY rating on shares of Ford (F, Tgt. $18), which represents ~40 percent appreciation from current levels, following what we deem to be conservative qualitative guidance for 2016 and the issuance of a $1B special dividend ($0.25/share)," Buckingham noted.

The firm sees Ford's North American pre-tax profit margin guidance of 9.5 percent as conservative for 2016.

"We believe that N.A. pre-tax profit margin guidance of 9.5 percent is quite conservative given the expected strength in volume, mix and pricing. However, in the near term, this announcement could put pressure on the entire auto group given concerns regarding a "peak" in auto sales, now that we have commentary from Ford that suggests moderating operating margins," the firm commented.

"2016 automotive revenue, operating margin, pre-tax profit (excluding special items), and operating earnings per share are all expected to be equal to or higher than 2015 levels. While this will likely not be viewed positively by investors, we believe that the guidance could prove to be conservative," Buckingham noted.