Morgan Stanley says Ford's dividend 'at risk' as Daimler cuts forecast

Shares of Ford (F) dropped in morning trading after the stock was downgraded to Equal Weight at Morgan Stanley, which said it has seen limited progress from Ford's restructuring as well as increased risk in a variety of areas. The downgrade comes amid a cautious note from the firm on the auto space and as peer Daimler (DDAIF) lowered its profit outlook for the year. FORD DIVIDEND AT RISK: Morgan Stanley analyst Adam Jonas this morning downgraded Ford to Equal Weight from Overweight and lowered his price targe for shares to $10 from $14, saying that the automaker's earnings and cash flow are under pressure and its dividend is at risk. Jonas told investors in a research note that Ford is suffering from a perception among investors that it lacks transparency and that while he sees the potential for "tens of thousands" of job cuts, he is increasingly concerned that the capital markets do not have confidence Ford will take decisive action fast enough. He added that though the company's recently completed $1.1B restructuring plan is a "crucial step," it has not provided enough detail on how that money will be spent. The company also cancelled its investor day in September, which worries Jonas. Rival General Motors (GM), on the other hand, has taken decisive action to attract significant outside capital that validates its GM Cruise investment, and Jonas values Cruise at $11.5B. In contrast, his valuation of Ford's Argo AI business has stayed at $1B, and he sees no clear catalysts for how such assets can be recognized by the market, he added. AUTOMAKER CAUTION: In another research note, Jonas said he remains cautious on U.S. autos, reducing his 2H18/2019 forecasts for Ford, GM and FCA (FCAU) after weak Q3 China auto shipment data. Chinese government stimulus actions in 2019 may be the biggest driver of auto earnings and share price performance in the next 6-12 months, the analyst said. DAIMLER CUTS PROFIT OUTLOOK: Separately, German automaker Daimler lowered its profit outlook for the year citing regulatory and diesel emissions issues. The carmaker said it now expects group operating profit for the year to be "significantly below market expectations" vs. 2017, which compares to its previous expectation of "slightly lower." Additionally, Daimler sees Mercedes-Benz EBIT well below the prior-year level, though Daimler Trucks' EBIT is expected to be "significantly above" the prior-year level. The company sees third quarter EBIT of EUR2.49B, down from EUR3.41B in the year-ago period. Daimler cited "ongoing governmental proceedings" as well as "measures in various regions with regard to Mercedes-Benz diesel vehicles" for the reduced guidance, and also said that its Mercedes-Benz Vans business recorded lower unit sales due to delays in vehicle deliveries. PRICE ACTION: In morning trading, shares of Ford are off earlier lows and are now down 0.5% to $8.48, while Daimler declined 2.5% to $58.42.