Stock Market Reacting Favorably to Analysts’ Reports on Ford With PM-Ford’s Therminator
DETROIT (AP) _ For months, stock investors pushed up the price of Chrysler Corp.‘s shares, the momentum feeding on itself. Value conscious players bet that General Motors Corp.’s new management would succeed in turning around the the ailing automaker.
Meanwhile, Ford Motor Co. - widely considered the healthiest of Detroit’s Big Three - was largely ignored.
That’s changing fast as Wall Street analysts take another look at Ford and like what they see.
Ford shares weres up again Monday, gaining 75 cents to $52.50 on the New York Stock Exchange. They crossed the $50 mark last week after analysts raised their estimates of Ford’s earnings.
″You knew the market was kind of neglecting Ford a little,″ said PaineWebber Inc. analyst Steve Girsky. ″It raised the possibility of a surprise one way or another. Fortunately, it’s going the right way.″
Analysts predict that Ford’s price will continue to rise because the automaker is doing well on two fronts: cushioning itself against Europe’s stagnant economies and taking market share from competitors at home.
A consensus of 20 analyst estimates for annual earnings this year puts Chrysler as the projected top earner this year: $4.37 a share or $1.52 billion. Ford follows at $2.65 a share or $1.29 billion, with GM at $1.33 a share or $918 million.
Analysts also see room for Chrysler’s stock price to improve despite a huge run last year that more than tripled the automaker’s shares from around $11 to nearly $40. They were trading Monday at $39, down $1 on the NYSE.
Chrysler’s steady stream of new cars and trucks, a growing reputation for manufacturing efficiency and quality, and its limited exposure in Europe are keeping investors interested despite so much recent growth.
″My feeling is the majority of people are underestimating how fast the company continues to improve,″ said Ted Shasta, an institutional investor with Loomis, Sayles & Co. in Boston. ″The pace of change there continues to go at a very rapid rate.″
GM, hailed for its structural improvements and management changes, is getting only neutral opinions. Analysts say the market has already factored the company’s restructuring into its stock price. Further, analysts and investors worry that GM’s aging model lineup will continue to make market share loss inevitable.
GM’s goal of maintaining its 34.7 percent share of the U.S. car and truck market will be hard to achieve, analysts say. An industry-wide uptick could limit the damage, but a stagnant or only slightly improving market - the pattern so far this year - favors Ford and Chrysler’s newer products.
GM was unchanged Monday at $39.75.
″GM definitely needs the recovery more than Ford or Chrysler,″ said PaineWebber’s Girsky. ″But when you look at GM, you almost don’t want the market to explode on them. You don’t want to take the pressure off those guys.″
Shasta said he’s most encouraged about Ford because it has installed Jacques Nasser, a crisis-tested manager, as its top executive in Europe. Ford also has slashed expenses there, including 10 percent of its payroll which Girsky said will save about $500 million this year.
Nasser recently predicted Ford of Europe would break even this year, a dramatic turnaround from two years of huge losses. Analysts suspect that is overly optimistic, but they say reducing last year’s $1.2 billion loss in Europe to $500 million or $600 million is likely.
The arrival of the critically acclaimed Mondeo midside car as a replacement for the 11-year-old Sierra and better control of other model inventories has helped Ford of Europe lower the amount of its incentives to buyers. Salomon Brothers analyst Jack Kirnan said rebates reached about 15 percent of sales in the second half of 1992.
In North America, where Ford was the only automaker to gain both car and truck market share in 1992, its pace has continued through the first 2 months of this year.