Morningstar

Ford's New CEO Unlikely to Move Stock Anytime Soon

Given that the U.S. auto industry in our view peaked last year, we are not sure what moves Jim Hackett can make in the short term that will boost the stock price--beyond the CEO change itself.

Securities In This Article
Ford Motor Co
(F)

Media reports the morning of May 22 have

We maintain our fair value estimate on this management change. The board has been frustrated with Ford’s stock declining about 40% since Fields took over from Alan Mulally in July 2014. We think Ford’s stock is undervalued, but given that the U.S. auto industry in our view peaked last year, we are not sure what moves Hackett can make in the short term that will boost the stock price, beyond the CEO change itself giving the market hope for something new. We expect Hackett to try to be more specific on timelines around Ford’s mobility services, which Fields said is a 20% operating margin opportunity, but we think large amounts of revenue from mobility services is still a ways off. We would not be surprised to see Hackett make more acquisitions in mobility, possibly move into ride hailing, or make an acquisition in a field such as development of pure electric vehicles or autonomous vehicles, as Ford did earlier this year with Argo AI.

We have seen Hackett speak on a few occasions and were impressed by him, but Ford’s product launches are in a lull compared with General Motors’ this year so we reiterate our uncertainty on what he can do to quickly boost the stock. Share buybacks would be welcome, but we do not expect that to happen given that Ford’s shareholder base strongly prefers a dividend and, more recently, prefers regular special dividends on top of the common dividend.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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