Cutting Ford (F) PT to Include a Recession Scenario - Stifel

Stifel analyst, James Albertine, acknowledges the strength in Ford's (NYSE: F)recent results but is looking further ahead to include some level of probability for a recession. He cut his target price on multiple contraction to $13.50 from $15 while leaving the Buy rating unchanged.

Ford reported record pre-tax profit of $10.8 bn (+48.1% or +$3.5 bn y/y) in FY15, including Automotive profit of $8.8 bn (+59.5% or +$3.3 bn y/y). Total wholesale volumes rose +4.9% y/y, automotive revenue rose +3.5% y/y and automotive operating margin rose to 6.8% from 4.6% in FY14. Ford global market share rose to 7.3% vs. 7.1% in FY14.

Strong FY15 results as credit loss metrics tick up slightly y/y though remain at historically low levels. In FY15, Ford Credit reported an improved net pre-tax profit of $2.086 bn (+12.5% y/y), driven by favorable volume and mix (+$474 mm y/y), growth on all products globally, and a higher financing margin (+$28 mm y/y) reflecting a lower borrowing cost. Results were partially offset by higher credit losses, primarily in North America and the translation effect of the stronger U.S. dollar.

Despite the strong quarter, negative sentiment appears to be well ahead of fundamentals. Ford shares seem to be pricing in a recession despite a solid 4Q15 result but the combination of an updated downside analysis and demonstration of improvements in upcoming earnings results are two keys to help Ford decouple from peers and promote a recovery in share price.

The analyst is cutting current year and out year earnings estimates to account for the possibility of a material downturn. FY17 EPS estimate goes to $2.00 from $2.14 (Street: $2.08), and FY18 EPS drops to $2.09 from $2.33 (Street: $2.08).

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 $11.51 yesterday.

You May Also Be Interested In

• Bernstein SocGen Group Upgrades Analog Devices (ADI) to Outperform
• Amer Sports Inc. (AS) PT Lowered to $42 at Truist, but 'Momentum continues to surge in a tough macro'
• Moderna (MRNA) PT Raised to $89 at Morgan Stanley