Why Did Ford Miss So Badly?

Shares of Ford (F) are getting smacked down today in a serious way.

How could Wall Street have missed so badly? Phil LeBeau, the auto guy at CNBC, writes:

Ford says there are four factors that may explain why analysts were off. They include:

* lower volume

* higher investment costs for manufacturing and advertising a new model launch (Explorer)

* high commodity costs

* Ford Europe being unprofitable.

All fair points.

But aren’t these factors Wall Street analysts should have caught?

Conversely, shouldn’t Ford have done a better job guiding Wall Street throughout the quarter about these factors shifting?

The answer to both is yes. To quote a long time follower of Ford on Wall St., “There’s plenty of blame to go around for this earnings miss. Ford and the analysts were not on the same page, and both are to blame.”

For the momentum stock investor who has piled into Ford shares recently, this miss hurts. The stock is getting whacked and it’s likely to feel pressure for a while.

But long term, has much changed at Ford? No. The trajectory at Ford is still very positive, and there are plenty of reasons to remain bullish on Ford. For the first time since 2008, it has more cash than debt, it’s profit per vehicle is strong, and its outlook for 2011 is moving higher. To quote an analyst who tracks Ford, “There’s still a lot to like about where Alan Mulally is taking this company.”

True. But today investors are paying the price for shares of Ford getting ahead of themselves and a big earnings miss that has many shaking their heads.

Posted by on January 28th, 2011 at 12:17 pm

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