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Ford Motor Company (NYSE:F) shares added 3.6% after UBS upgraded the stock to 'Buy' from 'Neutral,' citing what it sees as an underappreciated path to stronger earnings over the next several years.
The firm reiterated its 12-month price target of $15, implying nearly 24% upside from the current price of about $12.10. The upgrade reflects growing confidence that Ford can deliver earnings per share above $2 by 2027, with analysts projecting $2.08, around 17% higher than consensus estimates.
The analysts see "a credible path to Ford earning greater than $2 in EPS in 2027," adding that the market appears to be underestimating the company's earnings power. UBS estimates the market is pricing in roughly $1.73 in 2027 EPS, about 16% below its own forecast.
The analysts argued that recent pressures on the stock, linked to concerns over higher gasoline and aluminum prices, may be overstated. They noted that aluminum costs are largely hedged for 2026, while other headwinds should ease over time. "Transient headwinds dissipate in 2H26E," they wrote, pointing to improving conditions into 2027 and beyond.
Ford's current guidance for 2026 earnings before interest and taxes (EBIT) stands at $8 billion to $10 billion, equivalent to roughly $1.30 to $1.70 in EPS. However, UBS highlighted that this outlook includes a $1.75 billion drag tied to tariffs and logistics disruptions following a fire at a domestic aluminum supplier.
With that facility expected to return to operation in the second half of 2026, UBS sees underlying 2027 EBIT rising to between $9.5 billion and $12 billion, translating to approximately $1.60 to $2.05 in EPS even before additional improvements.
Further upside could come from increased truck production, cost efficiencies, and tariff-related benefits. The analysts also suggested Ford could land at the higher end or exceed its 2026 guidance, aided in part by an estimated $0.8 billion benefit from tariffs that were later ruled illegal.
Looking beyond 2027, UBS outlined a "march towards $3 in EPS power" later in the decade. This outlook is supported by a mix of factors, including a stronger product portfolio, a more pragmatic electric vehicle strategy, and a potentially more favorable US regulatory environment.
A key component of the longer-term thesis is Ford's expansion into battery energy storage systems (BESS). The company plans to invest about $2 billion to convert a Kentucky plant to produce 20 gigawatt-hours of lithium iron phosphate battery capacity for the energy storage market.