Ford shares are up more than 70% since Jim Farley became CEO, but he still has a ton of work to do

DETROIT — As Ford Motor’s new CEO, Jim Farley has promised more transparency on Wall Street as well as a clear plan for the future.

At the time, Ford was considered behind the industry in all-electric and autonomous vehicles, connectivity and software. His messages and plans were unclear to Wall Street, sending stocks tumbling.

Two years on, Farley, 60, has largely delivered on the company’s ongoing Ford+ transformation plan, but there’s still work to be done.

He restructured operations and largely brought Wall Street back into the automaker’s corner for the first time since Alan Mulally – credited with saving the automaker from bankruptcy in 2009 – stepped down as CEO a while ago. eight years. Ford shares are up about 70% since Farley took over, despite recent declines.

“What matters to us and to the team is delivering strong business results,” Farley told CNBC in August 2020, when he was announced as the new CEO. “When it comes to communications on Wall Street…one of the most important commitments we make as a team is a clear and focused plan for the business and business transformation.”

Farley’s two predecessors – Jim Hackett and Mark Fields – left the automaker amid lackluster stock prices and failed to build confidence in the automaker on Wall Street. Under Hackett, former CEO of furniture company Steelcase, Ford’s stock price fell 40%.

But, as Farley regularly says, the automaker remains in the early innings of its Ford+ transformation plan and the industry’s shift to electric vehicles – which likely accounts for the stock improvement under Farley, but also its recent drop amid a larger market decline. Ford shares hit decades-high prices of more than $25 a share to start the year, but are down about 56% from their January peak.

Doubts remain about the outlook for the auto industry as well as Ford’s ability to execute on its plans. The company continued to run into problems with vehicle launches, warranty costs and supply chains – all of which Farley pledged to solve upon becoming CEO.

“In our view, the key risks relate to Ford’s ability to profitably pivot into areas of growth such as electric and utility vehicles, the automotive cycle, market share and margins (both pressure on margins in the event of a downturn and the expansion of margins in the longer term thanks to company-specific initiatives), ” Goldman Sachs analyst Mark Delaney said in a note to investors last week .

More recently, the company surprised Wall Street by pre-releasing part of its third-quarter earnings report, warning investors of $1 billion in unexpected vendor costs. Since then, the company’s shares have fallen more than 23%, including its biggest daily decline in 11 years a day after the announcement.

“I think the most important thing he’s done is get the market to believe in Ford again. That belief may have been put on hold until they show they can deliver on the forecast for Ford. 2022 in light of the third quarter pre-announcement which is not at all well received,” Morningstar analyst David Whiston told CNBC, echoing other analysts.

Whiston describes Farley as an “outspoken communicator” who “isn’t afraid to take bold steps,” like internally separating Ford’s traditional and electric vehicle businesses; increase investment in electric vehicles to $50 billion by 2025; and cost and workforce reduction.

“He’s also a ‘car guy’ who I like because he has a passion for the product, which helps get vehicles like the Mach-E as opposed to some crappy (battery electric vehicle at economical box) that no one wants,” Whiston said, before adding that he would like to see fewer recalls and improved warranty costs. “But I think Ford is in good hands with Farley at the helm.”

Ford’s stock is overweight with a price target of $16.12, about $4 more than its current price, according to average analyst estimates compiled by FactSet.

Here are the best and worst days of action during Farley’s tenure as CEO so far:

• January 4, 2022, +11.7%: Ford announces plans to nearly double annual production capacity of its F-150 electric pickup to 150,000 vehicles per year at a Michigan plant.
• 10 Dec 2021, +9.6%: Farley tells CNBC Investing Club with Jim Cramer that the company closed reservations for its electric F-150 Lightning after surpassing 200,000 units.
• Oct. 28, 2021, +8.7%: Ford nearly doubled Wall Street earnings expectations and edged ahead of third-quarter revenue forecasts, leading the automaker to raise its annual forecast for the second time last year.
• 09/20/2022, -12.3%: Ford releases a preview portion of its third-quarter earnings report and warns investors of $1 billion in unexpected supplier costs.
• February 4, 2022, -9.7%: Ford significantly misses Wall Street’s fourth-quarter earnings expectations and misses revenue slightly.
• April 29, 2021, -9.4%: Ford impresses Wall Street with its first quarter results, but the company’s lackluster outlook for the year surprises, if not confuses, investors and analysts.

–CNBC Michael Bloom contributed to this report.