We are disappointed with Ford Motor Company’s (F) higher structural and commodity costs. The automaker expects to lose between $500 million and $600 million in 2012 in Europe, owing to the ongoing debt crisis.
Despite exceeding the Zacks Consensus Estimate by $0.04 per share in the first quarter of 2012, the company’s profits fell sharply by 20% to $1.6 billion. Profits from all the operating regions declined except North America. Revenue in the quarter slipped 2% to $32.4 billion, barely surpassing the Zacks Consensus Estimate.
As such, we have downgraded our recommendation on the stock to Underperform from Neutral and set a target price of $8.75. This valuation is derived at 6.5x 2012 EPS, and reflects our recommendation downgrade.
