Goldman Sachs analyst David Tamberrino sees value in Ford's restructuring in the European region, a media report said.
According to Bloomberg, he wrote in a client note this week it provides an opportunity to improve operating margins significantly in Europe, to over 4% through the cycle after restructuring actions, peaking at 7.5%.
"We believe this level of earnings is well above [Wall] Street expectations for the region over the long term which continue to call for losses [to the end of] 2021," he wrote.
He added that the company should be able to come close to "its targeted through-the-cycle 6% EBIT [earnings before interest and taxes] margin – a level that we believe the market currently underestimates."
Ford shares have more than 38% total return potential, when including the 6% dividend yield, Tamberinno said, adding that the recent pullback "an attractive entry point".
Bloomberg said Ford stock had far outpaced the S&P 500 so far this year but had still slumped 16% over the past year. It noted, though, 2019 hadn't been a good time for auto stocks as the Russell 3000 Auto & Auto Parts Index hit a three-year low at the end of May.
Bloomberg said. though though Ford and General Motors don't disclose the profitability of their pickup trucks, analysts have suggested doing so would unlock 'billions in trapped value' for automakers' shares.
The report said Tamberrino had maintained a Buy rating for Ford and raised his price target to US$13 from $12. He also raised his earnings estimate by 15 cents per share to $1.69.
"Once investors begin to see the pathway toward achieving a sustainably profitable European region, we believe shares will move higher," he wrote.