Citi Upgrades Ford

I see that Citigroup has upgraded Ford ($F) from a Hold to a Buy. That’s good to hear and it’s about time someone highlighted how good Ford is. The stock may get a little boost after today’s open.

Let’s remember that Ford fell short of earnings by 18 cents per share for Q4 but beat earnings by 12 cents per share in Q1. However, the stock still reflects the earnings miss, even though the earnings beat made up for two-thirds of the shortfall.

Wall Street currently expects Ford to earn $1.92 per share for this year and $2.01 for next year. That means the Ford is going for less than eight times this year’s earnings estimate.

Shares were up 12 cents, or 0.8 percent, to $15.20 in premarket trading Monday. Michaeli maintained his $18 one-year price target and wrote that the stock was still a high risk.

Michaeli also wrote that Ford has made impressive gains in cash flow and liability management, and an upgrade to investment grade status appears likely late this year or early next year. That should be a catalyst for the stock, he wrote. “A return to investment grade would open a few doors for the equity story including providing a path to refinance secured debt, shed covenants and eventually restore a dividend,” he wrote.

Ford also should benefit from model shortages expected this summer by Japan-based automakers due to parts shortages caused by the March 11 earthquake and tsunami, Michaeli wrote.

He maintained his forecast that U.S. sales would be 13.4 million this year, despite a Citi survey showing that fewer people are expecting to add vehicles in their households in the next two years. But he lowered his 2012 forecast to 13.9 million from 14.6 million based on the survey. For 2013, he also reduced the forecast to 14.5 million vehicles from 15 million.

Posted by on May 16th, 2011 at 8:12 am


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