The U.S. Postal Service (USPS) is renewing its fleet of delivery vehicles and Ford Motor (F) has been tapped as parts supplier, according to a Reuters report.
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The USPS contracted with Oskhosh Defense to have it build modern delivery vehicles for the postal service. The portfolio will consist of both electric and gasoline-powered vehicle models. Oskhosh Defense is a unit of Oshkosh Corp (OSK).
Ford will provide Oskhosh with engines and transmissions to use in making the new USPS delivery vehicles. Suspensions and other parts are also included. The parts will come from Ford’s Michigan plant, while Oskhosh will assemble the vehicles in South Carolina.
Oskhosh’s contract with the USPS could be worth more than $6 billion, according to Reuters, but Ford has not disclosed the financial terms of its deal. (See Ford stock chart on TipRanks)
Morgan Stanley analyst Adam Jonas reiterated a Sell rating on Ford stock but raised the price target to $11 from $9. Jonas’ new price target implies 26.22% downside potential. The analyst sees opportunity for automakers in the connected, or remote services, car business.
In addition to the price target hike, Jonas lifted Ford’s 2021 EPS estimate by 12 cents to $1 and 2022 EPS estimate by eight cents to $1.38. The valuation changes mark the analyst’s first time giving credit to Ford’s connected services.
“Recurring software derived and software delivered revenue will soon become table stakes and a highly competitive marketplace, but investors seem to be wrong-footed on the how quickly this can take root,” commented Jonas.
Consensus among analysts is a Moderate Buy based on 9 Buys, 6 Holds, and 1 Sell. The average Ford analyst price target of $15.25 implies 2.28% upside potential to current levels.
Ford scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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