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F Stock: Ford Motor Company Has a Long Road Ahead

General Motors Company (NYSE: GM) shares are up more than 25 percent in the past three months on positive commentary from analysts related to the company's autonomous vehicle technology. But while GM may soon be entering the next chapter of its business, the Ford Motor Company ( F) turnaround story is just getting started.

In May, investors initially cheered Ford's announcement that the head of its autonomous vehicles department, Jim Hackett, would be taking over as CEO. RBC Capital Markets analyst Joseph Spak says Hackett's long-term vision for Ford is on point, but it may take years for his initiatives to meaningfully impact the stock.

[See: 5 Automakers to Rev Up a Long-Term Investor's Portfolio.]

Hackett has said he wants Ford to shift about $7 billion of capital spending from cars to higher-priced utility vehicles and trucks. In addition, he wants to cut $14 billion in materials and engineering costs. Hackett also wants to pursue smart, connected vehicle technology but has provided few details about how Ford's plan will differentiate it from other automakers.

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"To be frank, aside from some cost-cutting that may be realizable, given the lead times in auto, most of whatever Mr. Hackett proposes wouldn't have an impact until 2019 or 2020 at the earliest," Spak says. "In the interim, we believe consensus 2018 EPS forecasts may be 8 percent too high."

Spak says Ford's single-digit earnings multiple and 4.9 percent dividend yield will likely limit downside for the stock for now. But without meaningful near-term catalysts and given a deteriorating North American auto market, he says upside is likely also limited.

[See: 10 Ways to Invest in Driverless Cars.]

Spak says Ford stock will likely trade in line with the overall auto market while the company works to cut costs and streamline its business. Ford may ultimately deliver game-changing autonomous vehicle and mobility projects, but it's simply too early for investors to put much faith in these initiatives.

Ford also seems to be a bit late to the game in prioritizing this type of technology. In September, Deutsche Bank analyst Rod Lache said GM could deploy a fully autonomous vehicle "within quarters, not years" and could be "years ahead of competitors."

RBC Capital has a "sector perform" rating on Ford and a $13 price target for the stock.



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