Ford F-150: Morgan Stanley says truck business may be more valuable than company

Ford received a rare “double upgrade” on Wednesday, with Morgan Stanley analysts saying the F-150 truck franchise may be worth more than the whole company.

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The automaker’s stock has underperformed rivals General Motors and Fiat Chrysler Automobiles as investors seek progress from Ford’s strategy to capitalize on booming SUV sales and new businesses such as electric cars and ride-sharing services. Shares of Ford have lost about 12% over the past 12 months while GM is up 2.6%, and Fiat Chrysler has gained a whopping 90.7% over the same period.

Morgan Stanley analysts lifted its rating for Ford by two notches to overweight from underweight, while raising its price target to $15 from $10 per share, partly citing the profitability of F-Series trucks. The investment bank said just a 5% increase in F-150 domestic volume is worth an estimated 10% to Ford’s bottom line. The F-Series, which includes F-150 and Super Duty trucks, could be worth the equivalent of $16 per share. Ford was trading near $11 on Wednesday.

“Ford’s out-of-favor status has brought valuation to where the F-150 may be worth [more than] 150% of its [enterprise value],” the analysts wrote in a research note to clients. “Restructuring and strategic redeployment could halt years of underperformance.”

Ford is also positioned to benefit from potential infrastructure spending, Morgan Stanley said. Non-residential construction accounts for as much as 30% of Ford truck demand, and higher oil prices should help drive sales in such states as Texas, the largest pickup truck market in the world.

Ford rallied on the report, climbing 2.9%.

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CEO Jim Hackett, who took over the company in May 2017, gave a presentation to investors about five months later to lay out a vision for the future. Hackett said Ford would strengthen its lineup of pickup trucks and SUVs, two lucrative and popular segments, in order to fund its investments in self-driving cars and other new technologies.

Ford recently launched a refreshed version of the F-150, in addition to new Expedition and Lincoln Navigator large SUVs. The U.S. return of Ford’s midsize truck, the Ranger, is scheduled for 2019.

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