Ford Motor Company’s share value surged today after Morgan Stanley upgraded the automaker, raising its valuation from “underweight” to “overweight” and puffing up its price target from $10 to $15 per share, Automotive News reports. The firm’s sudden faith in Ford comes shortly after a Goldman Sachs analysis estimated that the Trump administration’s steep tariffs on imported steel and aluminum could cause Ford to take a $1-billion hit each year. (JPMorgan put the estimated damage from the tariffs much lower, at $200 million this year and $400 million in 2019.)
In response to Morgan Stanley’s double upgrade of Ford Motor Company’s outlook, stock prices climbed more than 4 percent to $11.25 per share during off-hours trading.
Morgan Stanley analyst Adam Jonas said he raised Ford’s valuation by the greatest amount in five years largely because of the automaker’s financial “fitness push,” which will see the automaker slashing billions in costs over the next few years as it fights toward an 8-percent operating margin. “We see Ford as an out-of-favor self-help story with room to surprise the market with cost-savings and profit repositioning potential,” Jonas wrote in a research note.
When Ford Motor Company CEO Jim Hackett first announced the automaker’s fitness push last October, the response from the market and pundits was lukewarm. Stock prices hardly budged, and in a rather scathing opinion piece, Bloomberg Businessweek columnist Chris Bryant called Hackett’s presentation “a little short of big ideas,” criticizing the CEO for not sharing enough details.
Now, Jonas says that Ford’s restructuring could cut costs by 20 to 40 percent, and notes that the light-duty Ford F-150 pickup is still dominating in the market. The F-150 brand could be worth as much as 35 percent more than Ford itself, he says.
“Our revised target gives Ford credit for adjusting its global portfolio to emphasize its strong position in US pickup trucks, where the company has outsized exposure,” Jonas says.