Why Wall Street should be bullish on Ford

Investors should be bullish on Ford’s ability to turn its prospects around, according to a Wall Street analyst.

Continue Reading Below

Jefferies hiked its rating of the automaker’s stock on Tuesday to buy from hold, citing the likelihood that Ford will beat earnings forecasts in two years and make good on its plans to cut costs.

“Ford is getting no credit for ambitious but credible cost targets and for multiple operating and strategic levers still available to improve market and product exposure,” Jefferies analyst Philippe Houchois wrote in a research note to clients.

The investment bank also said Ford is among the first global automakers to re-evaluate how it allocates capital, “despite being a perceived laggard.”

Under CEO Jim Hackett, the company has undertaken an effort to improve its financial “fitness” by cutting costs and eliminating underperforming businesses. The company recently increased its cost-reduction target, saying it plans to achieve $25.5 billion in cost cuts and efficiencies by 2022.

Ford also announced that it would stop selling most passenger-car models in North America in a bet on the long-term popularity of SUVs and pickup trucks. Other manufacturers, including General Motors, have cut production of small cars in response to weakening demand.

Most analysts have a downbeat view of Ford shares, which have declined more than 8% since the start of 2018. Nearly 75% of Wall Street analysts who cover Ford have a hold or sell rating on the stock, according to Jefferies, citing FactSet data.

In addition to placing a “buy” rating on Ford, Jefferies raised its price target to $14 from $13.

Ford shares were down 0.6% at $11.44 on Tuesday.