Investment bank Jefferies released a research note on Monday, simultaneously upgrading ratings for Ford Motor and General Motors from "Hold" to "Buy." The upgrade is based on improving conditions in the U.S. auto market, optimized capital allocation, and reduced traditional cost pressures, with expectations for stronger earnings and cash flow from both companies over the next two years.
Jefferies raised its price target for Ford from $14.50 to $17.50, suggesting that the upcoming second-quarter results could mark a bottom for the company's profit margins. Analyst Philippe Houchois stated that with the F-150 production line, which had been impacted by a fire at an aluminum supplier's plant, returning to normal operations, the second quarter is expected to be a low point for sales. Given healthy demand in the U.S. market, management may raise its full-year guidance during the second-quarter earnings report. Jefferies has raised its forecast for Ford's adjusted earnings before interest and taxes (EBIT) for 2026 to $10.3 billion, approaching the upper end of the company's guidance range.
For General Motors, Jefferies increased its price target from $90 to $99, implying a nearly 20% upside from its closing price last Friday. This upgrade is primarily driven by confidence from the company's second-quarter results, which showed revenue and earnings beats and an upward revision to its 2026 performance outlook. Houchois noted that General Motors has made "meaningful progress" on recall and warranty costs, with further cost reductions expected in the future. Jefferies estimates that by 2027, driven by new truck launches, efficiency improvements, and growth in digital services revenue, General Motors could generate over $10 billion in annual free cash flow, with earnings per share potentially approaching $16.
Although both companies face macroeconomic uncertainties such as tariffs, Jefferies believes their risk-reward profiles have become attractive. Ford is scheduled to report earnings after the market closes on Tuesday, with investors closely watching for management's outlook for the second half of the year and into 2027.
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