For the last several years it seemed like Ford Motor could do nothing right, at least by Wall Street’s standards. Now suddenly, it’s a different story.
Shares of the second largest automaker on Friday surged past the $10 mark for the first time since last August. The stock, which has a market value of $41.5 billion, rose more than 10% Friday, logging its best performance since April 24, 2009. The surge capped off a seven-week streak of weekly gains that have boosted the shares 23.6%.
The shocking thing is the move came despite a 34% drop in first-quarter net income. What certainly mattered more to investors was the fact that Ford’s adjusted profit hit 44 cents per share, well above the 27-cent average analysts polled by Refinitiv projected.
“Our results … signal positive momentum for Ford,” said CEO Jim Hackett during a conference call with analysts and the media, adding that, “we have a solid plan to create value in the near and long-term.”
That’s something that Hackett has been saying for nearly two years, almost from the moment he was appointed to replace CEO Mark Fields in a May 2017 management shake-up. The question is why are analysts finally taking him seriously now – especially with Ford’s retiring Chief Financial Officer Bob Shanks cautioning those on the call that the automaker faces a “volatile environment with very strong competition.”
Indeed, a closer look at the first-quarter numbers reveals that while Ford performed well in its North American home – margins there climbing nearly a full point, to 8.7% – it faced significant problems in every other key market, from Europe to China.
While “there’s still some skepticism remaining,” Morningstar’s auto analyst David Whiston said, “sentiment has improved.”
Whiston, who currently rates Ford a buy, points to several positive factors, including the cuts now underway in Europe and South America, which should help profits in the future, and a broad product rollout, which could excite new buyers.
It seems investors are finally cheering the risky bets Ford is making to shift away from sedans and to invest in new technologies. And it comes at a time when the market is growing more wary of rival Tesla, which saw a sharp selloff after its earnings.