Thomas Weisel cuts Ford Motor (F) to peer perform from outperform.
Analyst Scott Merlis says high oil prices and continuing escalation of healthcare costs and a raw materials spike has recently crossed a new threshold, causing Ford to withdraw its 2006 profit target in addition to a moderate reduction in 2005.
He believes incentives will go higher not just on SUVs, but also on more fuel efficient vehicles. He thinks these increases are necessary in order to subsidize an escalating energy burden on consumers.
Merlis thinks a combination of these factors will more than offset an expected profit improvement from new products. He cuts his 2005 earnings per share estimate to $1.50 from $1.80.