Morgan Stanley has adjusted its stance on Ford Motor Company (NYSE: NYSE:F), moving from an "Overweight" to an "Equalweight" rating.
The firm also revised its price target for the automaker's shares, lowering it to $12.00 from the previous $16.00. The change reflects Morgan Stanley's anticipation of various challenges that Ford may face in the near future.
The downgrade is based on expectations that Ford will experience a greater loss of market share by the end of the decade. This forecast includes a reduction in normalized unit sales, which are the expected number of vehicles Ford sells under normal market conditions. The analyst cited concerns over potential price and product mix headwinds that could affect the company's revenue.
Additionally, Morgan Stanley pointed out several risks that could impact Ford's profitability, including regulatory compliance costs and risks associated with electric vehicles (EVs), autonomous vehicles (AVs), and operations in the rest of the world (ROW).
These factors are anticipated to contribute to a lower normalized earnings before interest and taxes (EBIT) margin for Ford.
The firm also adjusted its expectations for Ford's normalized earnings per share (EPS), reducing its estimate by 15.1%. This adjustment is a reflection of the anticipated decrease in profitability and valuation for the automaker.
In other recent news, General Motors (NYSE:GM) and Ford Motor may have to halt exporting vehicles manufactured in China to the U.S., following a proposed rule by the U.S. Commerce Department aimed at tightening restrictions on Chinese software and hardware.
Concurrently, Ford Motor has secured a binding supply agreement with ioneer Ltd's Rhyolite Ridge lithium mine in Nevada, which is nearing authorization and could become a significant lithium source for electric vehicle batteries.
Ford's tool and die unit within the River Rouge Complex is facing potential strike action by United Auto Workers members over unresolved contract disputes. Meanwhile, Ford, along with BMW (ETR:BMWG) and Honda (NYSE:HMC), has initiated operations of ChargeScape, a joint venture designed to manage the exchange of data and energy between electric vehicles and the power grid.
S&P Global has revised its forecast for global automotive production, signaling a contraction of 5.4% in the third quarter of 2024. Morgan Stanley expects this revision to cast a negative sentiment on upcoming quarterly results and create difficulties for auto suppliers in achieving margin expansion plans.
InvestingPro Insights
As Morgan Stanley recalibrates its perspective on Ford Motor Company, real-time data and insights from InvestingPro offer additional context for investors. With a market capitalization of $43.13 billion, Ford trades at a P/E ratio of 11.28, which adjusts to a lower 7.45 on a last twelve months basis as of Q2 2024, suggesting a potential undervaluation compared to historical earnings.
InvestingPro Tips highlight that despite weak gross profit margins of 8.04%, Ford remains a prominent player in the Automobiles industry. The company has also demonstrated commitment to shareholders, maintaining dividend payments for 13 consecutive years and offering an attractive dividend yield of 7.18% as of the latest data. This is particularly notable given the 30.0% dividend growth over the last twelve months. Moreover, analysts have revised their earnings upwards for the upcoming period, indicating optimism in Ford's profitability, which has been confirmed by the company's profitability over the last twelve months.
Investors seeking a deeper dive into Ford's financial health and future outlook can find additional InvestingPro Tips on https://www.investing.com/pro/F, where a comprehensive analysis is available. With 12 more tips listed, the platform provides a valuable resource for those looking to make informed decisions on this established yet evolving automotive giant.
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