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.
