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.
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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