Dow Jones Business News
Lehman Raises Ratings On GM, Ford Citing Safer Dividends
Wednesday August 6, 10:30 am ET
By Desiree J. Hanford, Of DOW JONES NEWSWIRES
ST. LOUIS -(Dow Jones)- Lehman Brothers Inc. analyst Darren Kimball raised his ratings on General Motors Corp. and Ford Motor Co. to equal weight from underweight, saying their dividends are safer thanks to better-than-expected earnings and cash flow.
Kimball also raised his 2003 and 2004 earnings estimates and price targets for both auto makers.
Kimball raised his 2003 earnings estimate for GM to $4.80 a share from $3.50 and his 2004 forecast to $3.40 a share from $2.25.
For 2004, Kimball still expects that lower production and lower mortgage earnings will drive down GM's earnings. However, better cost performance and higher international auto earnings "will be more of a mitigating factor" than Kimball previously expected, he said in his research note.
Kimball also put in 40 cents a share in earnings in the 2004 outlook because he no longer assumes a 50 basis point reduction in the pension discount rate.
Kimball raised his price target for GM to $33 a share from $28. The increase stems from his improved earnings forecast and a more confident view of the auto maker's dividend.
Kimball raised his 2003 earnings forecast for Ford to 85 cents a share from 70 cents and his 2004 expectation to 90 cents from 60 cents. His 2005 estimate remains at $1.35 a share.
Ford's guidance on second-half cost performance for 2003 will ultimately prove to be too cautious, Kimball said in his note. The cost hit from Ford's newly designed F-150 pickup truck is much smaller than analysts fear, he said.
Kimball increased his 2004 earnings forecast because of Ford's traction in reducing its costs. The increase also includes a benefit of 3 cents a share from a flat pension discount rate, compared with his prior assumption of a decline of 50 basis points.
Kimball increased his price target on Ford to $10 a share from $9.
Kimball doesn't own shares of GM or Ford. Lehman Brothers has managed or co- managed a public offering of securities in the last 12 months for both auto makers, and Lehman has received compensation for investment banking from GM and Ford.
Shares of GM were recently trading at $36.34, up 13 cents, or 0.4% on volume of 887,100. Average daily volume is 6.6 million.
Ford's stock was recently trading at $10.59 a share, up 7 cents, or 0.7%, on volume of 2 million. Average daily volume is 10.2 million.
-Desiree J. Hanford, Dow Jones Newswires; 314-588-8443; desiree.hanford@dowjones.com |
