Ford On Deck: Is $20 a Share in Sight?

DETROIT ( TheStreet) -- As Ford ( F) chugs towards a sixth-straight profitable quarter, analysts are suggesting its stock is on track to hit a milestone unseen since 2001 -- a $20 share price.

Ford will report earnings Tuesday morning at 7 a.m. ET. Analysts surveyed by Thomson Reuters are looking for 38 cents a share, up 46% from the same period a year earlier but down from 61 cents in the second quarter. CFO Lewis Booth has said repeatedly that profit growth will slow, partially because of rising commodity prices. .
Ford

The market has been pushing shares up steadily since they hit $1.01 in November 2008. The gain was 335% in 2009. This year, it is 38%. Still, Ford shares have a long way to go to get back to the levels they hit in 2001, when they traded between $14.70 and $31.42. In mid-afternoon trading Monday, shares were up 14 cents to $14.09.

A steady stream of analysts has been looking fondly at Ford. Early this month, Adam Jones of Morgan Stanley initiated coverage with a $20 price target. Also in the $20 camp is John Murphy of Bank of America Merrill Lynch, who said the price is supported by EBITDA and EPS multiples, including nine times his full-year 2011 estimate.

Murphy also enumerated risks to his target, which include lower than anticipated industry sales, higher costs, market share losses supply chain disruption, significantly higher gas prices and an inability to gain labor costs equivalent to those at General Motors and Chrysler.

The key third quarter metric to watch, Murphy said, will be cash flow, following the $2.6 billion Ford generated in the second quarter. "Overall, Ford's leadership team continues to execute on its One Ford plan and is positioning the company to be a long-term leader," he wrote. "Thus far into 2010, Ford has taken down $7 billion in debt, which will likely drive higher future earnings as interest expense declines." Nevertheless, he expects results to decline sequentially "following the strength in the last few quarters."

Meanwhile, Deutsche Bank analyst Rod Lache can't quite see $20. Earlier this month, he upgraded Ford to buy from hold with a target of $19.50, up from $14.50.

"Ford shares appear poised for a meaningful upward re-valuation," Lache wrote in a report, when Ford was at $13.64. He said his hold rating had been based on "uncertainty over a number of medium-term risks, but recent market and company specific developments suggest that these risks are manageable, or diminishing in intensity."

Another factor in Ford's favor is a series of upgrades from bond analysts, which over time will have the effect of reducing borrowing costs.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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