Ford Motor Co. (F) - Get Report shares jumped higher Tuesday after analysts at Morgan Stanley boosted their price target on the carmaker and said a more-focused model lineup would keep profits stable over the next two years.
Morgan Stanley analyst Adam Jonas lifted his rating on Ford to 'Overweight' from 'Equalweight" in a Tuesday client note while raising his target price on the stock by 205 to $12 per share, citing the carmaker's recent partnership with Volkswagen AG (VLKAY) and its emerging electric vehicle plans. Jonas said his previous forecast called for a 40% drop in Ford's earnings, from $1.20 per share in 2019 to 75 cents in 2022, but now sees the carmaker's bottom line stabilizing between $1.20 and $1.30 per share over the same time frame.
"Our previous concerns over Ford's ability to maintain its dividend payment have largely subsided," Jonas wrote. "Our earnings outlook implies free cash flow in line with or exceeding the dividend payment vs. our prior FCF forecasts which lagged cash return."
Ford shares were marked 1.6% higher in early Tuesday trading to change hands at an opening bell price of $9.39 each, a move that extends the stock's year-to-date gain to around 23%.
Last month, Ford reported second-quarter earnings of 28 cents a share on revenue of $38.9 billion, topping Wall Street's expectations of 31 cents and $38.5 billion, but disappointed investors with a full-year earnings outlook of between $1.20 and $1.35 a share.
Earlier this year, Ford confirmed its trans-Atlantic alliance with Volkswagen at the Detroit Auto Show that will focus first on commercial vehicles but could later extend to electric and self-driving cars as markets in the world's two biggest economies continue to slow.
The combination does not include ownership stakes for either carmaker, but will focus instead on fresh investments into technologies in the self-driving and electric vehicle sector, which many analysts feel will be the key driver of future profits as China, the world's biggest car market, makes the switch away from traditional combustion engine cars.
The companies aim to deliver medium pickup trucks for global customers in 2022 and follow with commercial vans in Europe the year after that.
Ford's U.S. rival, General Motors (GM) - Get Report , saw shares hit a 52-week last week after it posted better-than-expected second quarter earnings Thursday as strong North American truck sales helped offset an ongoing slump in China's deteriorating car market.
Looking into 2019, GM said it sees full-year earnings in the range of $5.91 to $6.75 per share, with capital expenses in the region of $8 billion to $9 billion. Adjusted earnings, GM said, were held in the range of $6.50 to $7.00 per share.