Ford and GM Upgraded by Jefferies on Improving Outlooks, Stronger Cash Generation

Jefferies analysts have upgraded their ratings for Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) to Buy, highlighting improved earnings forecasts, increased free cash flow potential, and progress in operational challenges.

Ford’s Upgrade and Outlook

The upgrade for Ford arrives ahead of its second-quarter earnings release. Jefferies suggests this quarter may represent the lowest point for profit margins as production stabilizes following earlier disruptions and Ford improves capital allocation.

The price target for Ford was raised to $17.50, with the valuation gap between Ford and GM narrowing. Currently, Ford shares trade near $14, marking a 10% gain year-to-date.

Jefferies projects Ford’s adjusted EBIT to reach $10.3 billion in 2026, near the high end of the guidance range ($8.5 billion to $10.5 billion). The adjusted free cash flow forecast was increased to approximately $4 billion, driven by earnings improvements, enhanced working capital management, and lower electric vehicle supplier compensation costs.

Key areas of progress for Ford include:

• Development of a universal electric vehicle platform
• Investment in battery energy storage systems
• Reduction in warranty expenses
• Streamlining of its European asset base

Jefferies also expects Ford’s Blue business unit to improve in 2027, supporting earnings recovery after recent challenges.

Regarding the upcoming second-quarter results, Jefferies anticipates ongoing volume pressures but notes that reduced production could enable a better vehicle mix. This may help avoid costly aluminum sourcing. The firm estimates a second-quarter adjusted EBIT of $2.5 billion for Ford and expects electric vehicle-related losses to moderate.

General Motors’ Upgrade and Forecast

Jefferies raised General Motors’ rating to Buy, emphasizing confidence in GM’s ability to strengthen its US market position and generate over $10 billion in annual real free cash flow starting in 2027.

The new price target for GM is $99, above the current share price near $86. The firm increased its 2026 to 2028 estimates by approximately 6%.

GM’s earnings outlook is supported by upcoming vehicle launches, operational efficiencies, and broader product offerings.

Highlights include:

• Refreshes of Silverado and Sierra trucks
• Enhanced vehicle content such as Super Cruise technology
• Potential growth from digital services

Jefferies raised GM’s 2026 adjusted EBIT estimate to $15.8 billion, at the top end of company guidance, with a 2027 projection of $17.4 billion. North American operations are expected to remain the primary earnings driver, supported by stable market share, improved pricing, and ongoing warranty cost reductions.

In the first half of the year, GM cut warranty expenses by $500 million, with further cost-saving potential available. The analysts also noted that a large portion of GM’s electric vehicle cash expenditures have already been incurred, reducing future financial burdens.

Valuation and Investment Considerations

Jefferies highlights that both Ford and GM have improved earnings visibility.

• Ford is trading at approximately 6.6 times projected 2027 earnings.
• GM is trading at about five times projected 2027 earnings.

While a potential re-rating of valuations could deliver additional upside, Jefferies indicates that such a development is not required to justify their respective price targets.

Key Takeaways

• Jefferies upgraded Ford and GM to Buy on improved earnings and cash flow outlooks.
• Ford’s adjusted EBIT is projected at $10.3 billion in 2026 with a new price target of $17.50.
• GM’s adjusted EBIT estimate is raised to $15.8 billion for 2026, with a price target of $99.
• Both companies show progress in operational efficiency, warranty cost reductions, and electric vehicle strategies.
• Valuations appear attractive based on projected 2027 earnings multiples.