Tough Outlook For Ford, But Analysts Say The Stock Is Now Reasonably Priced

Ford Motor Company F stock continued to drop on Wednesday after the company's disappointing earnings report, but two sell-side analysts kept positive ratings on the beleaguered automotive giant.

Ford lost $1.7 billion in the fourth quarter and earnings per share came in at 12 cents, 3 cents below consensus expectations, though the company did beat analysts' expectations on quarterly net sales.

The Ford Analysts

Morgan Stanley's Adam Jonas kept an Overweight rating on the stock with a $12 price target.

Bank of America's John Murphy reiterated a Buy rating , while lowering the target price from $12 to $10.

See Also: Ford Falls On Q4 Earnings Miss, Lower Outlook; Notes Execution Problems Around Explorer

The Ford Theses

Murphy said much of the bad news around Ford is already priced into the stock.

"Admittedly, a review of Ford’s 4Q:19 results and 2020 outlook paints a relatively tough picture," Murphy, while also acknowledging what Ford said on its earnings call - that it has had execution challenges.

But with a 10% sell-off, Ford's difficulties now appear baked into the share price.

"Should Ford see any progress on launches and restructuring," he wrote in a note, "we believe sentiment on the stock could improve and the multiple re-inflate."

Jonas noted Ford is guiding to "materially lower" operating profit margin in 2020.

Jonas said his Overweight rating has been a bet that Ford would execute on cost-cutting initiatives.

"Ford’s 2019 and projected 2020 profit targets place them significantly below the average profitability of the global auto OEM peer group," he wrote. "While we still see room for improvement, this appears to require a pace of execution that is not,at this point, clear to investors from the full year guide."

Ford Price Action

Ford's stock was down 9.42% on Wednesday, trading at $8.32.

Photo by Dave Parker via Wikimedia.