Ford Posts Gains; Analysts Still Cautious

Ford Motor Co. (F) revved up the market with a surprising C$100-million first quarter profit Thursday, but analysts at Goldman Sachs and Citigroup are warning investors that the Blue Oval’s shares may not be as tempting as that new 500-hp Shelby Mustang.

Goldman analyst Patrick Archambault argues in a report dated April 25 that although Ford managed to squeeze out C$1.3-billion in cost improvements year over year during the quarter, Ford’s turnaround is likely to to be “very protracted” as it deals with a decline in high-profit truck and SUV sales, higher costs for raw materials, and a U.S. sales market that shows no sign of bottoming.

Mr. Archambault said:

Given the weak fundamentals, and the stock’s 64% rise from its recent March 17 trough, we would wait for a better entry point.

He rates Ford “neutral,” raising his 6-month price target to $9 from $7.25.

Citigroup analyst Itay Michaeli is recommending investors sell their Ford shares. He argues that with the company’s stock trading at 8.2 times 2010 consensus earnings per share, a significant premium to several other well-positioned global automakers, “Ford’s risk-reward proposition appears outright unattractive.”

Dissecting Ford’s Q1 results, the analyst says Ford’s entire pre-tax profit consists of low-quality gains, including C$350-million of non-recurring commodity hedge gains. Ford also burned through C$300-million more cash than he expected. Mr. Michaeli raised his price target on Ford shares to C$6 from C$5.50.

Comments

[raman kandola]

this is going higher.. we have kerkorian... in a buying binge...
last time he had a stake with GM he was able to get a big run up...

more power to to KIRK ~

[Ames Tiedeman]

Why the market cap of F is higher than GM is beyond me. GM is the much better buy here.

[rh13]

Friday I was guessing that it would probably be a year or so before the press discovered Ford was getting well. Now, with Kerkorian having discovered it, I imagine the press may discover it within a few days. This morning could be the last Ford buying opportunity we will see for a long while.