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Why Ford Motor Company's Shares Slumped 12% Last Month

By John Rosevear - Feb 26, 2018 at 1:01PM

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Pressure is mounting on Ford's still-new CEO.

What happened

Shares of Ford Motor Company (F 2.43%) had a rough ride in January. The Blue Oval's stock closed the month down 12.2%, according to data provided by S&P Global Market Intelligence, after its 2017 earnings and guidance for 2018 both fell short of investors' expectations.

So what

Ford's shares began their slump after the company presented a preview of its fourth-quarter results and its 2018 guidance at a conference for investor analysts on Jan. 16. Ford didn't report its complete fourth-quarter and full-year 2017 earnings until the following week, but the preview given at the conference made it clear that results would fall well short of Wall Street's estimates (and they did).

Hackett is shown before a white backdrop with a blurred Ford logo.

Pressure is mounting on CEO Jim Hackett, who has been in the top job for less than a year. Image source: Ford Motor Company.

Simply put, Ford's profit and margin both slipped in 2017 from 2016, and its guidance for 2018 didn't offer much hope for improvement in the near term. Ford said that rising costs and increasing pressure on its pricing would likely push full-year 2018 earnings per share down to somewhere between $1.45 and $1.70, versus $1.78 in 2017.

Adding to investor pessimism, CFO Bob Shanks said that while Ford has a plan to boost its margins and earnings, it's likely to be a couple of years before it has a noticeable impact on Ford's bottom line.

Now what

Now, Ford needs to execute on its plan. But maybe more importantly, at least from Wall Street's perspective, CEO Jim Hackett needs to clearly communicate the plan, in detail. Hackett took Ford's top job last May, promising a plan to improve Ford's "fitness" and profitability, but so far he has offered only high-level ideas. Investors would like to hear specifics, soon -- and until they do, Ford's share price is likely to lag the market.

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