Ford Motor Company (NYSE:F) made a shift toward the next-generation of vehicles on Monday when it replaced CEO Mark Fields with Jim Hackett. Normally a change in leadership wouldn’t be this noteworthy, but Hackett is the former head of Ford Smart Mobility — the division focused on connected and autonomous vehicles. So far, the response in F stock has been mixed.
Despite the previous CEO’s declaration of rolling out autonomous vehicles for ride sharing by 2021, Ford had been lagging behind its peers in making progress in this field, so the move was a major statement on where the company intends to focus next.
The idea of walking outside and seeing cars drive themselves may still seem like something out of science fiction movie, but many insiders believe it’s not that far from becoming a reality. As a result, more and more major automakers have been pouring money into this trend.
Even Ford, which had been at the forefront of mass producing automobiles, invested $1 billion earlier this year into a joint venture with Argo AI to work on self-driving cars.
But does the CEO change and new direction make Ford a buy?
The Lag in Ford Stock
Looking closer at the company, there’s no question F is lagging the market right now. And its earnings are declining while the S&P 500 is on a double-digit growth trajectory. The company earned $1.93 a share in 2015 and then $1.76 a share in 2016. They’re estimated to fall even further this year to $1.55 a share. In fact, Ford isn’t expected to earn as much as it did in 2015 until at least 2021.
Ford is also lagging its peers. Over the past year, F stock is off 18%. Compare that to single-digit gains for General Motors Company (NYSE:GM), Toyota Motor Corp (ADR) (NYSE:TM) and Honda Motor Co Ltd (ADR) (NYSE:HMC).
From a technical perspective, the shares did experience a short-term bounce following the announcement of the executive change, but they’ve spent the days since drifting lower.
I think there are two major issues here that have kept investors on the sidelines:
- First, the entire auto industry is facing a concern that involves total vehicle sales starting to slow after a few years of solid gains.
- The second goes back to what I mentioned earlier – Ford lags its competitors, namely Tesla Inc (NASDAQ:TSLA), in the autonomous vehicles space.
The new CEO could be the first step in making up some ground, but the market as a whole, as well as myself, must see some definitive changes before considering this stock a buy.
For now, I wouldn’t seek out Ford stock as an investment. There are some really interesting opportunities to make money on the next-generation theme of self-driving cars, but F is not yet one of them.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.