Ford’s CEO needs to deliver by next quarter, or we’re moving on from the stock

By Kevin Colleran On Feb 4, 2023

Ford Motor (F) CEO Jim Farley on Friday said the automakers’ messy fourth quarter was a function of its transition to a new business structure that limited production capacity, combined with poor execution. But we remain disappointed in the results, and need to see an increase in profitability to stick with the stock after the next quarter. Farley, in an interview with CNBC, said he’s in the midst of restructuring Ford to do business more efficiently, but has faced challenges in simplifying processes at the auto giant, which in turn held back its profit last quarter. “It’s a lot to change. We have a lot of complexity relative to the customer and inside our company. It takes time to work through that,” Farley said. Ford on Thursday reported adjusted earnings-per-share (EPS) well below analysts’ forecasts, overshadowing a revenue beat. The company’s full year EPS guidance also came in weaker than expected , sending the stock tumbling Friday. Shares were down more than 8% in afternoon trading, at $13.12 apiece. The earnings miss comes days after Ford said it was cutting prices of its electric Mustang Mach-E crossover , while raising production, weeks after EV industry leader Tesla (TSLA) made a similar move. The price cuts mean not all Mach-E models will be profitable on a per-unit basis. Last year, Ford announced a split of its electric vehicle (EV) and internal combustion engine vehicles into seperate business units, called Ford Model e and Ford Blue, respectively. But profitability has yet to catch up with the restructuring. Farley on Friday said the automaker needs to work through higher-than-expected costs, a shortage of semiconductor chips and supply chain snags to achieve better profits at its EV division. “It takes a simplified effort to get to that 8% margin we’re looking for,” he said. However, he added, management still needs to rethink how to produce and distribute EVs in a more cost-effective way. The Club take “It’s inexcusable that Ford had a bad quarter,” Jim Cramer said Friday. “We will boot the stock if this quarter isn’t good,” he added. It’s positive that Farley has acknowledged the need for greater supply-chain efficiency, increased production, an improved cost structure and better execution — but we need to see the results. We’re sticking with Ford for now but it’s in the penalty box, meaning management has one more quarter to get it right. If we don’t see improvement by the next quarterly report, we will have no choice but to move on. (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Ford CEO Jim Farley at the company’s Dearborn, Michigan, plant where it’s building the electric F-150 Lightning on April 26, 2022.

CNBC | Michael Wayland

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