Investors to Ford Analysts: Drop Dead
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Ford Motor investors weren’t buying what auto analysts were selling on Friday.
After Ford reported in a Thursday filing with the Securities and Exchange Commission that it will lose about $570 million in Europe in the second quarter, at least five analysts reiterated “buy” recommendations. Nevertheless, investors sold off shares. The stock ended the day down 5 percent at $9.59. For the year, Ford is down 12 percent.
Let’s run through the notes the analysts issued on Friday.
Efraim Levy of S&P Capital IQ wrote that “Ford’s warning about deteriorating performance outside the U.S. bodes poorly for automakers and suppliers.” But Levy noted that U.S. results “remain a bright spot, even though growth could slow, (and) global volume trends have remained favorable until now.” He maintained a “buy” rating.
UBS analyst Colin Langan said that while the filing was disappointing, “this is largely priced-in, as many investors expect auto estimates to be cut. We still see significant upside to the shares (because) Ford is trading at seven times our revised 2012 (earnings per share), below its (10 times earnings) decade average.”
Langan reduced his full-year 2012 estimate to $1.45 a share and his price target to $15 from $16, but he maintained a “buy” rating.
Citibank analyst Itay Micheali wrote in his Friday morning note that “Ford did not guide down or raise any concern over North America profitability in the second quarter or full year” and that Ford expects to be profitable in the second quarter. The analyst said “the revision reinforces our view that the alpha today in autos resides in areas generally outside of European dependence, such as our ‘Go Long U.S. Pickup Truck’ thesis.” He removed Ford from Citibank’s top picks list, but reiterated a “buy” rating, with a $14 target price.
Deutsche Bank analyst Rod Lache wrote that “the magnitude of this deterioration comes as a surprise, as we had not seen much evidence of a sequential decline in production.” But Lache added: “Nor have we seen a large sequential decline in Ford’s sales volumes in these regions.” He too maintained a “buy” rating.
Finally, Morgan Stanley analyst Adam Jonas wrote that things are “getting medieval in Europe” and said Ford’s announcement provided “a double dose of reality and politics.” Jonas said “Ford enters the club of auto makers with immediate needs to address excess capacity through near-term action.” In other words, the loss could pave the way for cutbacks. Jonas, meanwhile, ranks Ford as “overweight,” with a $17 target.
Regarding TheStreet's headline, one of the most famous newspaper headlines ever was published in the New York Daily News on Oct. 30, 1975, after President Gerald Ford said in a speech that he would not approve federal funds to keep the city from filing for bankruptcy protection. The front page headline read: “Ford to City: Drop Dead.”
We don’t mean it literally.
—By TheStreet.com’s Ted Reed
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