Ford shares gain after Bank of America upgrades the stock to buy

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Ford shares rallied before the opening bell Friday morning after Bank of America Merrill Lynch upgraded the equity to buy from neutral.

The brokerage highlighted Ford’s favorable profit outlook, the result of what’s expected to be a strong utility vehicle and truck lineup over the next few years and a major restructuring at the Dearborn, Michigan-based automaker.

The upgrade comes as “Ford’s ‘tough’ days [are] starting to fade into the rearview,” wrote Bank of America autos analyst John Murphy. The company should “hit Escape velocity in 2H:19+ with solid Car Wars position … upgrade to Buy.”

Murphy bumped his price target on Ford to $14 from $13, implying about 37% upside from Thursday’s close. He also increased his 2020 and 2021 earnings per share estimates for the automaker to $1.30 and 90 cents, respectively.

“Ford is just starting to hit a more sustainable inflection in earnings (even more so in 2020), driven by the combination of a favorable product cadence in the all-important US/[North America] market and restructuring efforts,” the analyst wrote.

“Our annual Car Wars analysis indicates that Ford will have one of the freshest line-ups in the US market over the next four years,” he added. “Combined with the company’s strategy to exit the passenger car segment, this product cadence bodes well for market share, mix/price, and profits in Ford’s North America business.”

The shares jumped 2.6% in premarket trading.

Bank of America did note, however, that automakers across the board could see headwinds in the months to come as a result of an economic downturn in the United States or persistent trade disputes around the globe.

Murphy also underscored uncertainty around interest rates, foreign exchange and commodity prices, though noted that those questions weren’t enough to offset the promise of Ford’s internal turnaround and organic strength into the next two years.

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