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Why Ford (F) Stock Popped Despite Recalling 1.4 Million Vehicles

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Shares of Ford (F - Free Report) were up more than 3% in morning trading Wednesday after the American auto giant’s latest analyst upgrade was enough to outweigh concerns over a new recall that could affect up to 1.4 million vehicles.

Ford was lifted two notches to “overweight” by analysts at Morgan Stanley, marking the firm’s first upgrade for the carmaker in nearly four years. Morgan Stanley also slapped a $15 price target on the company’s stock, which represents a 39% upside from Tuesday’s close.

In a note to clients Wednesday, Morgan Stanley analyst Adam Jonas suggested that President Trump’s mooted infrastructure plans could support Ford’s near-term earnings, while the company could also surprise investors to the upside if its cost cutting and market repositioning moves are successful.

The bullish note was enough to inspire positive trading on Wednesday morning, despite Ford’s decision to recall about 1.4 million vehicles which were determined to have a defect that can cause the steering wheel to become loose and even detach while driving.

Ford said the affected models were Ford Fusion and Lincoln MKZ vehicles from the model years 2014 to 2018. The automaker also noted that it was aware of two accidents and one injury that may have been caused by the defect.

Regardless, investors should note that Morgan Stanley’s optimistic rating for Ford is just one piece of what has been a mixed analyst picture for the company. Over the past 60 days, negative revisions to Ford’s full-year earnings estimates have outnumbered positive revisions four to two, but the Zacks Consensus Estimate has still managed to gain three cents over that timeframe.

Still, this mixed revision activity has kept the stock at a Zacks Rank #3 (Hold). Our latest consensus projections are calling for Ford to witness adjusted earnings per share of $1.54 and total revenues of $147.8 billion in the current fiscal year. These results would represent year-over-year declines of 13.5% and 0.5%, respectively.

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