By Senad Karaahmetovic
Deutsche Bank analysts downgraded Ford Motor (NYSE:F) shares to Sell from Hold, citing earnings risk and operational shortfalls.
The price target is slashed to $11 per share from the prior $13, implying a downside risk of more than 20% relative to yesterday's closing price. The downgrade and PT cut comes after "large" earnings miss and guidance, which the analysts say looks "aggressive" and represents "considerable operational shortfalls and suggest meaningful downside risk to earnings trajectory."
"Management blamed supply chain conditions but also recognized its suboptimal material economics and poor operational execution; we also worry about its limited visibility into its supply base," they said in a downgrade note.
Ford said it expects $2.5 billion and more from cost improvements, mostly from falling materials prices and manufacturing efficiencies. The carmaker guided to $9-11B in 2023 EBIT while the analysts project $8.9B while allowing space for this number to get further downgraded.
"While we expect some benefit from lower commodities prices, we struggle to wrap our heads around such a considerable expected reduction in materials costs, and Ford didn’t provide any color on tangible restructuring program that would generate such savings so rapidly. The flat pricing assumption could also prove optimistic in light of the expected rebound in industry incentives from record lows and future price cuts, particularly in a recessionary environment with softening consumer demand," they further explained.
The analysts highlighted the upcoming teach-in event scheduled for March 23 as a potential catalyst for the Ford stock, which was up 23 year-to-date (YTD) into earnings.