'One Ford' Will Be One Of The Most Successful Auto Turnarounds In History, But Stay Cautious On Ford's Stock

Jefferies' Philippe Houchois expects Ford Motor Company F to offer more stable returns that its peers, despite the company's high dependence on the U.S.

Houchois initiated coverage of the company with an Underperform rating and price target of $10.

NAFTA Exposure

"We think the ‘One Ford' strategy will go down in history as one of the most successful auto turnarounds in history given its simplicity and effectiveness," the analyst mentioned.

The refocus on a single brand and Ford's slimmed down portfolio had provided above average scale for the company.

On the other hand, this strategy has also left the company exposed to NAFTA for a large part of its profits, Houchois cautioned.

Related Link: Jefferies Initiates General Motors At Hold, Sees Limited Upside In Lieu Of 'Peak Cyclical Conditions'

Management Confidence Decline

The analyst noted that there had been an obvious change in management confidence, stating, "Compared with the Q1 earnings call, management came across almost surprised or unprepared for a more challenging environment, although the only major new development was the Brexit vote in the UK."

Ford's exposure to the Pound Sterling is one of the highest among its peers, ever since the company stopped assembling vehicles in the U.K.

Houchois believes the expected downturn in auto sales, following the Brexit vote, would delay a recovery in Europe, leaving NAFTA as a "dominant profit center" for some time and laying to rest hopes of a quicker rebalancing of profit exposure.

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