A 'unique' turnaround story could be in the works at the automaker
Ford's stock has been out of favor on Wall Street, but that could be changing.
Wall Street has long been more positive about General Motors than Ford, but that may be about to change.
Ford $(F)$ late Tuesday surprised investors by raising its 2026 guidance for the second time this year, leaning more on what it does best: selling SUVs and pickup trucks, which for years have been among America's favorite vehicles. These also are the more profitable, sporting better margins than smaller models or EVs.
Ford's brighter outlook came as the carmaker reported second-quarter earnings that were well above analyst expectations. The stock was up more than 3% on Wednesday, and Wall Street analysts took notice of the Ford's traction.
"Ford's stock has been out of favor on the Street. ... We believe momentum is turning," Citi analysts led by Michael Ward said in a note Wednesday.
The Citi analysts raised their rating on Ford's stock to buy, highlighting the accelerating production of Ford's F-series pickup trucks, an improved picture for Ford's aluminum supply and "moderating" material costs, all of which could be positives in the second half of the year.
Of 23 analysts polled by FactSet, 61% rate Ford shares as a hold, and only 30% have buy ratings. The picture is much different for GM $(GM)$, as 80% of the 29 analysts tracked by FactSet have buy ratings on that stock.
Several analysts also took the opportunity to raise their price targets on Ford's stock, including Tom Narayan at RBC Capital Markets, who increased his to $15 from $13. Narayan highlighted Ford's improved margins, but also zeroed in on Ford's EV losses.
Ford's quarterly results "were an important signal that EV losses are likely to improve," which could "dramatically" help Ford's adjusted earnings in the next three years, Narayan said.
"If Ford can execute on its multiyear plan, this could be a unique turnaround story in autos," he said.
Others took a similarly long view. Analysts at Deutsche Bank said in their note that Ford deserves kudos for its price mix and "resilient" quarterly results. But "there is a fair amount of investment and complex execution still to come," especially as the carmaker readies its new EV platform and builds out its Ford Energy business.
"We believe these transitions are already largely priced into the stock, thus execution will be key over the next few quarters as management navigates these capital deployments," the Deutsche Bank analysts, led by Edison Yu, said in their note.
Ford executives said that demand for Ford Energy products has been strong. Interest likely is coming from both tech hyperscalers and utilities, Alexander Perry at BofA Securities said in a note. Ford Energy could start contributing to Ford's profit by 2028, and it's likely to carry attractive margins and a short payback period, said Perry, who is among analysts with a longstanding buy rating on Ford's stock.
Ford is operating in a favorable regulatory environment for its highest-margin trucks, Perry added. Recovery in F-Series production and a "continued" prioritization of higher-margin vehicles, as well as potential future customer announcements related to the energy business, are likely to support that upside view.
Shares of Ford have gained about 18% this year, compared with an advance of around 11% for GM and of 8% for the S&P 500 index SPX.
-Claudia Assis
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