Ford Motor Company (F) Company Is Downgraded Despite High-Level Growth In China

Ford Motor Company (F)

On September 8, 2014, Morgan Stanley downgraded its recommendation of Ford Motor Company (NYSE:F) from Overweight to Underweight. Morgan Stanley also reduced the target price of the company from $17 to $16. According to Adam Jonas from Morgan Stanley, trucks constitute important portion of the company’s profit so the starting of the production of new F-150 pickup truck in the last quarter of 2014 will limit the short-term profits of the company. Jonas think that introduction of new F-150 will require some modifications in the existing plants and this additional costs will reduce the profit of the company. The most popular vehicle of Ford Motor Company (NYSE:F) is F-150 and the company sold approximately 500,000 of F-150s so far in 2014.

Ford Motor Company (F)

Jonas stated that,

“We frequently talk with investors who claim Ford’s new truck will be a game changer, but rarely hear any expectations for what GM and Chrysler will do to content and price in response. There will be a response,”

Currently Ford Motor Company (NYSE:F) shares are traded with P/E ratio of 10.45 and dividend yield of 2.9%. The company has a market cap of $65 billion and is recently traded at $16.8 with 5% premium to valuation of Morgan Stanley. The company has lost 2% since the downgrade of recommendation by Morgan Stanley.

Ford sold 717,537 vehicles in the first 8 months of 2014 in China. The company achieved 30% increase in Year-To-Date sales in China.John Lawler, Chairman and CEO for Ford China said that,

“We have experienced an unprecedented period of growth over the last few years,”,…, “While that high-level of year-over-year growth is not sustainable with our present manufacturing footprint, we are confident that with our new assembly plants coming online in Chongqing and Hangzhou as well as great new nameplates like the Ford Escort and Ford Mustang—we will continue to attract new customers to the Ford brand.”

David Schoch, Vice President of Ford Motor Company (NYSE:F) is planning to participate 2014 Morgan Stanley 2nd Annual Laguna Conference in Dana Point on September 15, 2014.

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