Wall Street Reacts To Ford's Strong Q3: 'Investors Are Getting Excited'

Jayson Derrick

Automaker Ford Motor Company (NYSE: F) reported Wednesday with strong third-quarter results that were highlighted by a return to profitability. Here's how three Street analysts reacted to the print.

The Ford Analysts

Benchmark analyst Michael Ward maintains an Overweight rating on Ford with a price target lifted from $10 to $11.

Morgan Stanley analyst Adam Jonas maintains an Overweight rating on Ford with an unchanged $8 price target.

BofA Securities analyst John Murphy maintains a Buy rating on Ford with a price target lifted from $9 to $10.50.

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Benchmark On Ford's 'Blowout' Quarter 

Ford reported EPS of 65 cents per share versus expectations of 34 cents as part of a "blowout" quarter, Ward said in a note.

The strong performance was driven by record results in North American and Ford Credit, while losses in China improved and could hit breakeven in 2021, the analyst said. 

View more earnings on F

Operating cash flow less capital spending was $5.7 billion in the quarter, and this helped Dearborn fully pay off a $15-billion loan from the revolving credit facility, he said. 

Morgan Stanley's 6 Takeaways On Ford's Q3

Ford's strong earnings were due in part to low costs related to COVID-19, a record high favorable sales mix, strong pricing, tight inventory and record used prices, among other factors, Jonas said in a note.

The quarter marks a reversal from years of underperformance, and "investors are getting excited," the analyst said. 

Morgan Stanley's six main takeaways from the print are:

  • Adjusted EBIT of $3.6 billion was approximately three times better than expected.

  • North America accounted for more than half of the EBIT beat.

  • Ford's fourth-quarter adjusted EBIT guidance of a loss of $500 million to break-even is better than Morgan Stanley's prior estimate of a $733-million loss.

  • Costs related to model changeovers like the F-150 truck are responsible for a drop in fourth-quarter EBIT, but the guidance is still better than expected.

  • Adjusted free cash flow was "very strong" at $6.3 billion and beat Morgan Stanley's estimates by a factor of two.

  • New products will help support earnings growth, but "it's up to new management" to achieve results.

"While we currently have an OW rating, we note that after hours, the stock is trading above our $8 price target," Jonas said. 

BofA Sees A 'Good Sign' From Ford 

Ford's results will likely be duplicated across the entire auto sector, as the group benefited from solid volumes and a very favorable price/mix, Murphy said in a note.

Ford's results are not unique to the blue oval, but it's still a "good sign" for investors, the analyst said. 

Ford's results immediately follow "a lack of consistent execution" over the last few years and could foreshadow solid results in 2021 and beyond, according to BofA. 

F Price Action

Ford shares were trading 4.02% higher at $8.03 at last check Thursday.

Photo courtesy of Ford. 

Latest Ratings for F

Date

Firm

Action

From

To

Oct 2020

B of A Securities

Maintains

Buy

Oct 2020

Barclays

Maintains

Equal-Weight

Oct 2020

Goldman Sachs

Maintains

Neutral

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