As Ford Motor (NYSE:F) prepares to report earnings after the market close on April 25, the mystery surrounding its stock continues. How is it possible that Ford stock isn’t even worth $10 per share?
Ford sports a dividend of 15 cents per share and every quarter it out-earns that dividend. For the current quarter, earnings are expected to be 26 cents per share, on revenue of over $36.5 billion.
Usually a yield of 6.8% on any investment is worth paying for, especially if it can be repaid from earnings. But that’s not the case for Ford stock. The only comparable yield I can find is AT&T (NYSE:T), and their balance sheet is a mess. Meanwhile, Ford has less than $12 billion in debt, against cash and short-term securities of $22 billion. Yes, there are pension obligations out there, but the balance sheet is not a mess.
The Vision Thing
The problem with Ford stock, obviously, is the vision thing. Investors don’t buy Ford’s vision, and traders have tired of waiting for them to.
In the name of full disclosure, I was one of those traders. I bought Ford a few years ago at about $12 and finally turned in my hand at close to the April 23 opening price of $9.50. Despite the dividend I lost a little money.
Ford hired Jim Hackett as its CEO nearly two years ago, after a stint as Interim Athletic Director at the University of Michigan, where he hired Jim Harbaugh as head football coach.
At the time of Hackett’s hiring at Ford, Harbaugh looked like a great hire. But Michigan is still Michigan, a good team that should be in the national championship fight but manages to stumble against rivals like Ohio State, the teams its fans most want to beat.
The same thing is true for Hackett at Ford. The numbers aren’t that bad. They’re just not very different from his predecessors.
Hackett’s vision, like Harbaugh’s, was grand. But a year after it was first announced it looks pedestrian. Every big U.S. car company is pushing pick-ups and SUVs instead of sedans. Every big car company has plans for electrics and self-driving cars.
GM is Hackett’s Ohio State
There are rumblings that Hackett isn’t being up-front with his dealers, as there are rumblings over Harbaugh and the media. Hackett’s strategy seems vague and profits are still not rising. Ohio State is still out there.
Executive chairman Bill Ford, whose family still controls the company, continues to defend Hackett. He’s the athletic director here, noting that Hackett is addressing the company’s problems in Europe and China, and that he has a long-term plan.
But he can’t beat Ohio State, or as they call it in the Ford board room, General Motors (NYSE:GM). GM has given its shareholders a 14% gain in the last two years, against Ford’s loss of 17%. Tesla (NASDAQ:TSLA), despite its recent troubles, is still worth $7 billion more than Ford, with barely 15% of Ford’s sales.
The Bottom Line for Ford Stock
Ford, and Hackett, insist their turnaround of the company is a long-term project and that they’re on track.
A new chief financial officer has been recruited from Amazon.com (NASDAQ:AMZN). The company has a new plan for China, built around electric cars, and is restructuring in Europe. Hackett is trying to water down the hype over self-driving cars. If a recession comes, Hackett insists Ford will be ready. There’s even a new electric SUV coming to market next year. It’s like recruiting a 300-pound high school lineman with closing speed.
But Ford is still trailing GM, and as the halftime whistle blows on Hackett’s Ford tenure, the fans are wondering if he can ever get Ford over the hump.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.