Stock Picks: BofA, Ford

Plus Wall Street analyst opinions on Charles Schwab Corp. and Bed Bath & Beyond

Bank of America Corp. (BAC)

Credit Suisse upgrades to outperform from neutral; raises price target

Credit Suisse analyst Moshe Orenbuch upgraded his investment recommendation on Bank of America on Jan. 7, saying that the repayment of the entire $45 billion of TARP preferred "relieves a significant overhang" on shares of the largest U.S. lender.

"With a fairly significant capital raise behind the company and bolstered capital levels (pro forma Tier 1 common ratio of 8.5% vs. large cap median of closer to 7.5%), we expect shares to outperform over the next 12 months", the analyst wrote in a note. Factoring in both the capital raise and TARP repayment, Orenbuch lifted his 2010 earnings per share (EPS) estimate to 90 cents from from 80 cents. He said his 2009 EPS estimate was negatively impacted by the $4.1 billion charge in the 2009 fourth quarter due to the TARP repayment; he reduced our his 2009 forecast to a loss per share of 4 cents from EPS of 45 cents. Orenbuch said the capital raise was about 10% dilutive to his normalized earnings estimate, which now stands at $2.65.

Orenbuch said that BofA is the cheapest of the large cap banks covered by Credit Suisse on "normal" earnings, trading at a multiple of about 6.1 times (vs. its large-cap peers at 7.6 times) and "will build book value rapidly during 2010". The analyst raised his price target to $21 from $17.

Credit Suisse also added shares of BofA to its U.S. Focus List on Jan. 7 in conjunction with the upgrade.

Ford Motor Co. (F)

UBS maintains buy; raises price target

UBS analyst Colin Langan said in a Jan. 7 note that he remains bullish on Ford Motor Co. as he expects it to benefit from market share gains, improved pricing, better operating leverage, and the recovery of the U.S. auto market.

Langan said that a recent decision by Ford, the only major U.S. automaker to avoid bankruptcy, to fund part of its UAW retiree healthcare obligations with cash rather than equity "reflects well on Ford's liquidity outlook".

Langan raised his estimate on Ford's 2010 U.S. market share from 15.5% to 15.8%. "The key driver of our share increase is the Fiesta," he wrote, which "fills an important void in Ford's product line-up and will help improve its position in small cars". The analyst continues to forecast U.S. auto sales of 12.3 million in 2010, up 18% from 2009.

The analyst raised his EPS estimates for 2010 from 70 cents to 80 cents, for 2011 from $1.60 to $1.70, and for 2012 from $2.00 to $2.10. He also raised his price target on Ford shares from $12 to $13.

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