Stocks of US automakers Ford (NYSE:F) and General Motors (NYSE:GM) surged on Monday over reports that China, a major market for those companies, will be cutting its sales tax for auto sales.
A report by Bloomberg carried in Barron's said China was reportedly considering cutting sales taxes on vehicles by up to 50%, possibly spurring sales of vehicles in one of the world's largest auto markets.
Ford was also boosted by reports that Goldman Sachs analyst David Tamberrino upgraded Ford to Buy and raised his price target from $9 to $12.
Shares of Ford jumped almost 6.8% to a session peak at $9.59 while General Motors stock rose over 5% to a day's high of $34.30.
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The Goldman Sachs analyst forecasts product launches in lagging key markets to catalyze positive earnings in North America and China beyond 2019, with 12% of the firm’s $2.5 billion of initiatives driving bottom-line growth.
“While we still expect a downward earnings trajectory into 2019 (North America profit under-pressure), we believe next year will represent trough earnings and the combination of a refreshed product cadence globally as well as cost improvements from strategic initiatives will begin to take hold,” Tamberrino wrote in a note. “We believe Ford can put itself on a pathway to earnings that are above normalized EPS by 2021.”
Goldman Sachs maintains expectations for a regular dividend and sees Ford’s $7 billion, five-year cash restructuring plan driving $2 billion to $3 billion in free-cash-flow and earnings-before-interest-and-tax improvements.
Reporting by Rene Pastor, contactable on rene.pastor@proactiveinvestors.com