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TheStreet Open House

From Mulally to Fields, Ford Understands the Importance of Leadership Transition

Stocks in this article: AAPLFGMMSFT

NEW YORK (TheStreet) -- The transition of leadership at Ford (F) in July -- from Alan Mulally to Mark Fields -- marks an uncommon event among large corporations: the planned, transparent and smooth succession of the top leader of the organization.

As of 3 p.m. Monday, Ford stock is holding steady for the day at $17.30. The stock is up 12% year to date. 

Unlike at GM (GM) a few years ago, at Apple (AAPL), Microsoft (MSFT) or any number of other companies, the upcoming change marks a process so well defined and understood by the organization, the public and the markets, that it is seen across the board as a positive move.

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The one concern that some pundits have is whether or not Mark Fields can fill the shoes of Alan Mulally, a well-recognized turn-around artist that took Ford from near bankruptcy to multi-billion dollar profits in 8 years.

In my opinion, not only can Fields not fill Mulally's shoes, he would be well advised not to try.

Fields' task is to bring a new direction to a stabilized, but still challenged, organization. (Ford appears to be on more solid footing than recall-riddled GM.) Fields brings different strengths than Mulally. With over 25 years at Ford, Fields has the experience and know-how to lead Ford through some aggressive challenges. He has filled high-level positions in the U.S., South America and, most importantly, Asia -- which positions him as an insider with a strong world view.

Fields has also made his vision clear, most recently at the 2014 Ford Trends Conference, that Ford must be a leader in automotive consumer technology.

The future Ford is as a "personal mobility" company, Fields has said.

It's easy to talk about how dealing with issues like these is almost a luxury compared to what Mulally faced in 2006. But that's the point of planned and thoughtful succession. The leadership needs of Ford today are vastly different than those of 2006.

Fields has nothing to prove in relation to his mentor and prior boss. If he has any luxury, it is the ability to honor his predecessor -- who kept the company alive -- while Fields attempts to engineer a new vision.

I'm excited to watch Fields in the next few months as he takes on this task.

Let's look at TheStreet Ratings's take on Ford.

TheStreet Ratings team rates FORD MOTOR CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FORD MOTOR CO (F) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • F's revenue growth trails the industry average of 20.9%. Since the same quarter one year prior, revenues slightly increased by 0.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 952.13% to $2,220.00 million when compared to the same quarter last year. In addition, FORD MOTOR CO has also vastly surpassed the industry average cash flow growth rate of 40.62%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Automobiles industry and the overall market, FORD MOTOR CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • FORD MOTOR CO's earnings per share declined by 40.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, FORD MOTOR CO increased its bottom line by earning $1.75 versus $1.42 in the prior year. For the next year, the market is expecting a contraction of 24.0% in earnings ($1.33 versus $1.75).

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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