Wall Street’s weird reaction to Ford’s news

Wall Street’s reaction to Ford Motor Co.’s year-end results illustrates what a weird game it can be to run a publicly traded company.

To recap:

• Ford posted a $6.6 billion net profit, hitting the range sometimes referred to as “Toyota money.”

• Wall Street analysts pronounced themselves disappointed, and Ford’s share price fell.

Analysts were bummed because Ford posted fourth-quarter net income of only $190 million. That was significantly lower than $886 million in fourth quarter 2009.

But consider the explanation: Ford was busy launching products and paying down debt -- things that you want a car company to be doing, I think.

Ford’s sin was failing to meet analyst expectations, and that’s where things get, as I said, a little weird. Sometimes I think that Wall Street would applaud a company that lost $1 billion, assuming that analysts had predicted a loss of $1.5 billion.

Stock price movements -- and analyst buy/sell/hold recommendations -- can be misleading, too. Strictly speaking, they don’t track corporate performance. They represent the market’s bet on whether the share price will go up. A healthy company whose stock is fully valued may see share prices decline as investors take profits or decide not to buy because there’s no upside.

For perspective, remember a few years ago when Ford seemed to be mired in quicksand. One turnaround plan followed another, with dismal results. So let’s be clear: For Ford to rake in $6.6 billion is a very good thing.

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.