Goldman Sachs Downgrades GM (GM), Upgrades Ford (F)

(Updated - June 24, 2015 7:07 AM EDT)

Goldman Sachs downgraded GM (NYSE: GM) from Buy to Neutral with a new $40 price target (from $47) and upgraded Ford (NYSE: F) from Neutral to Buy with a new price target of $19 (from $18).

Analyst Patrick Archambault said the key driver to the change is "a superior growth outlook at Ford as it starts to see the volume, mix, and pricing benefits from the F-150 launch in 2H15, as well as still improving positioning in China."

Meanwhile, GM "truck incentives are already rising from increased competition, and we believe its China guidance looks vulnerable."

The firm sees Ford posting a 15% 2015-2017 EBITDA CAGR relative to the 5% we project for GM.

The analyst said incentives are likely to be a big differentiator in North America. "Ford already posted a very strong pricing performance in 1Q15 and we expect positive pricing to persist given the new F-150 model is still only 50% of sales and is launching in a tight inventory environment," he said. "By contrast GM truck pricing has continued to be soft in 2Q15, according to Autodata, and we believe pressures will likely intensify as F-150 availability increases."

In addition, Ford is less vulnerable to a softening China. "Following our recent trip to China, our China Autos team has lowered its growth expectations for the market by 150bp/100bp/100bp to 9.5%/8.0%/7.0%," Archambault comments. "While the outlook for China has worsened for both companies, Ford is less dependent on China earnings than GM, Ford’s near-term product momentum appears stronger, and Ford has also pared back expectations somewhat, while we believe GM likely needs to cut China guidance."

For Ford, 2015/2016 EPS estimates are 4%/8% above consensus. For GM. 2015E EPS is 5% below the Street, alalthough they are in line for 2016).

For an analyst ratings summary and ratings history on Ford click here. For more ratings news on Ford click here.

Shares of Ford closed at $15.13 yesterday.

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