RBC analysts turn incrementally bullish on Ford stock: here’s why

Ford Motor Company (NYSE: F) caught investors off guard Wednesday when the automotive giant reported a very strong top-and-bottom line beat. The results prompted RBC Capital Markets analysts to turn incrementally bullish on the stock.

The new Ford Motor price target

RBC Capital Markets analyst Joseph Spak maintained an Outperform rating on Ford’s stock with a price target lifted from $16 to $17. In a note dated Wednesday, the analyst wrote that the “confidence coming from Dearborn is brimming.”

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According to Spak, Ford’s revised 2021 EBIT guidance of $10.5 billion to $11.5 billion (up from $9 billion to $10 billion) could prove to be conservative given a $1.3 billion EBIT beat in the third quarter. But investors shouldn’t expect fourth-quarter consensus estimates to change amid commodity headwinds while Ford’s pricing power may not be as strong.

The research firm is also modeling Ford to report a 2022 EBIT of $11 billion which implies flat year-over-year growth versus 2021 levels. However, there are a few factors to keep in mind, including 2021 EBIT includes a $0.9 billion investment gain.

Excluding these gains, Ford’s EBIT would be up 9% in the coming year. While pricing power could return in 2022 it may be offset by other factors, including expectations for commodities to represent another $1.5 billion headwinds.

Nevertheless, the company’s move to reinstate its dividend as early as the fourth quarter of 2021 represents a “sign of confidence,” Spak wrote.

What Ford investors might be missing

Investors typically assume Ford Motors is a North American-focused company. In reality, Ford’s international segment posted a $2.4 billion profit so far in 2021, the analyst wrote. Investors may need to reconsider their stance on the international segment as it could outperform expectations next year.

Ford’s EV ambitions a ‘watershed moment’

Ford’s management estimates that global demand for its new Mach-E electric car could be more than 200,000 units a year while the E-Transit is sold out. 

Meanwhile, the F-150 Lightning already collected more than 160,000 orders and represents a “watershed moment” for the company, according to RBC. Specifically, the venture into an electric truck not only protects its “golden goose” but could expand its share through innovative features like Intelligent Backup Power.