Ford Seen Closing Valuation Gap With GM After Underperformance

Research firm RBC Capital upgraded Ford (F) to Outperform from Market Perform, saying that investors could begin favoring the U.S. automaker over its competitor, GM (GM).

Recent Gap 

Since September 2016, Ford stock has underperformed GM shares by 21%, noted RBC Capital analyst Joseph Spak. Going forward, investors could "start to favor Ford, especially relative to GM," the analyst stated.

Positive Catalysts 

Expectations for Ford are "low," and, barring "a macro shock," there is little chance of the company's results missing expectations, Spak believes. Noting that the U.S. macro economic outlook has improved since Ford last issued guidance in September, Spak expects analysts to raise their estimates for the auto maker before they lower them.

Meanwhile, due to factors such as a lower corporate rate and capex deductibility, Ford believes that tax reform will have a positive to neutral impact on its finances, and that it is better positioned for tax reform than its competitors, wrote Spak. The analyst said he agrees with that assessment. Finally, Ford's North American production levels may "look relatively more attractive" towards the end of Summer 2017, the analyst stated.

Target 

Spak raised his price target on Ford to $14 from $13.

Price action

In early trading Friday, Ford rose 0.8% to $12.47 per share.