Merrill Lynch Dives in on Ford Motor Company (F) Ahead of Investor Day

Ford Motor Company (NYSE:F) is hosting an Investor Day today. From Merrill Lynch analyst John Murphy‘s viewpoint, the discussion will focus on the automaker’s long-term. Previewing the conference, Murphy highlights five key topics he expects F will review.

First, Murphy anticipates initiative updates in regards to Ford Smart Mobility, from connectivity to mobility to autonomy. He notes, “Ford’s strategy to remain competitive in the evolving industry appears solid, to us, but not at the cost of the core business or financial targets.”

Second, while Murphy believes outlooks for both near-term and long-term are “likely ok,” he finds them “unlikely to inspire.” He recognizes downside risks to F’s financial outlook for the fiscal year of 2016. “We believe Ford may provide a FY17 outlook, although we think it is unlikely that Ford’s 2017 outlook would be a material positive surprise versus Street expectations,” he explains.

Third, Murphy contends the automaker is in solid product standing through MY2020, explaining that “with a solid product cadence that is above average,” this “should allow the company to maintain its current market share. Ford is also at the forefront of adding advanced features, such as ADAS, to its products, which should support demand.”

Fourth, Murphy notes F’s capital allocation strategy centers around three basic points: upholding an investment-grade balance sheet, One Ford Plan financing, and realizing growing, profitable results. From the analyst’s perspective, emphasis will be placed on shareholder value, as F will incorporate supplemental dividends into its ongoing strategy.

Fifth, recently, Murphy downgraded F from a Buy to a Neutral in the wake of its first-quarter earnings, and he anticipates in light of a trajectory of cash flow and earnings expected to decrease at the rate of GM’s, Murphy concludes, “We believe Ford’s stock may underperform GM’s in the back half of the year.”

As such, the analyst reiterates a Neutral rating on shares of F with a $14 price target, which represents a 13% increase from where the stock is currently trading.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst John Murphy is ranked #655 out of 4,163 analysts. Murphy has a 64% success rate and yields 8.3% in his annual returns. When recommending F, Murphy realizes 31% in average profits on the stock.

TipRanks analytics exhibit F as a Hold. Based on 11 analysts polled in the last 3 months, 4 rate a Buy on F, 5 maintain a Hold, while 2 issue a Sell. The 12-month average price target stands at $13.14, marking a 6% upside from where the shares last closed.


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