BOSTON (TheStreet) -- The case was made last week to consider GM (GM) - Get General Motors Company (GM) Report at a new post-IPO low. Even more compelling is Ford (F) - Get Ford Motor Company Report, the only U.S. automaker that didn't require a government bailout to survive the Great Recession. Under the laudable leadership of Chief Executive Officer Alan Mulally, Ford has refocused on fuel-efficient vehicles, streamlined its operations and fortified its balance sheet. Its stock has surged from a 2009 low of $1.58.

However, the stock is down more than 17% from its most-recent high as the news flow has turned negative in recent weeks. March domestic vehicle sales

for the industry declined to just over 13 million, missing the consensus estimate by 1.8% and falling sequentially by 2.7%. Recent gross domestic product downgrades at banks including

Morgan Stanley


Goldman Sachs

as well as the

International Monetary Fund

, have also hurt sentiment for automakers. Yet Ford's first-quarter earnings consensus has trended up by 2 cents in just four weeks, indicating optimism. The second-quarter consensus has fallen by 2 cents.

Researchers forecast that Ford will report 50 cents of adjusted earnings per share today, a modest increase of 3.3% from a year earlier. They predict less than $31 billion of sales, which would be a 2.5% decline. Ford's stock tumbled 14% in reaction its last earnings report as the company exceeded the consensus sales forecast by 14%, but missed on profit by 38%. The Japan earthquake required Ford to halt production at select factories to conserve hard-to-produce parts. Two new models,




, are selling well in 2011 despite higher fuel prices, due to efficiency.


runs at 40 miles per gallon on the highway.

The Japan disruption won't affect earnings, according to Mulally, and may, in fact, allow Ford to poach market share from once-favored


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. Ford's U.S. retail market share missed guidance in the first quarter, at beneath 14%, and its total market share dropped to just over 16% from the year-earlier quarter. Still, Mulally is adamant to steer clear of excessive marketing and discounting efforts as profitable expansion is more important to him than market-share gains. Analysts' aggregate opinion of Ford's stock has dimmed in 2011. Currently, 11 researchers rate it "buy" and eight rank it "hold." No analysts rank the shares "sell."

The stock has a median 12-month target of $19.42, suggesting there is 26% of upside.


, despite ranking Ford "neutral," has the highest target on Wall Street, at $20, a projection echoed by

Deutsche Bank



. Ford's stock is undervalued relative to peer investments and market averages. It trades at a trailing earnings multiple of 9.7, a forward earnings multiple of 7.7, a sales multiple of 0.5 and a cash flow multiple of 5.1 -- industry discounts of up to 66%. Its PEG ratio, a measure used to discount expected growth, at 0.8, demonstrates a 20% discount to fair value. Balance sheet improvement is ongoing.

The Dearborn, Michigan-based firm held $29 billion of cash and equivalents and $104 billion of long-term debt at the fourth quarter's end. Debt fell by a reassuring 21% from a year earlier. And shareholders' deficit, racked up during the recession

Ford suffered a cumulative per-share loss of $6.50 during 2008, dropped from $7.8 billion to $673 million in the latest quarter. Positive equity should be reclaimed in fiscal 2011. Ford's unit sales jumped 16% in March, exceeding the consensus projection of 9%.


pickup sales jumped 21%, implying market-share gains. Total truck sales stretched 20% and utilities sales advanced 28%, auguring for solid earnings.

JPMorgan is wary of cost inflation, though notes that investors have probably priced in that outcome, as input costs, ranging from metals to leather, have been on a tear amid the commodity bull cycle. The bank accurately forecasted net-margin compression in the previous quarter and speculates that "cyclical cost pressures" will continue to be a headwind for Ford. Nevertheless, it expects the company to earn upwards of $2 a share by 2014. Last quarter's results were hampered by the


recall, which accounted for $300 million of the $1 billion quarter-over-quarter cost rise. Avoiding future recall charges is critical.

One unit that JPMorgan is optimistic about is Ford Motor Credit, which is expected to suffer a halving of profits in 2011 as it released significant credit reserves in 2010. JPMorgan speculates that an uptick in employment will cause additional reserve releases, potentially boosting full-year net income. Also, higher parts-and-services profits, accrued when Ford parts are sold in the aftermarket through dealerships, may provide another, albeit marginal, tailwind in 2011. Ford's stock is abnormally volatile around earnings, with an average absolute price change of 3.9%. It remains a compelling long-term value, despite current obstacles.

-- Written by Jake Lynch in Boston.


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