By Chris Kornelis 

Facebook raked in more than $21 billion in revenue in the third quarter, has upward of 50,000 employees, and more than three billion people use at least one of its products in any given month. But it came in dead last in customer satisfaction among the top 100 U.S. companies in this year's Management Top 250 ranking, drawn down in part by a low net promoter score -- which shows customers' willingness to recommend the company -- from J.D. Power.

For a growing company with a healthy balance sheet, does it matter?

Rick Wartzman, head of the KH Moon Center for a Functioning Society at the Drucker Institute, which created the statistical model used to rank the companies in the Management Top 250, argues that it does. Few companies, he says, perform well in all of the categories that Drucker measures -- customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength. But ranking below the 25th percentile in any one of those categories, he says, amounts to a red flag, a warning sign that the company is especially weak in that area.

"And that weakness," he says, "if it's severe enough and left untended over time, may ultimately undermine the whole enterprise."

He notes that Eastman Kodak Co., which filed for bankruptcy protection in 2012, had a healthy balance sheet and many happy employees for years. Had Drucker been tracking the company in the mid-to-late '90s, he believes it would have performed well overall -- but with a persistent red flag in innovation.

"And we all know how that story ended." he says.

There are 12 companies in the top 100 with a red flag in one of the five categories. Here is a closer look at some of them:

AT&T Inc.

Red Flag: Customer Satisfaction

AT&T's customer-satisfaction score landed in the 19.2nd percentile, hurt in part by a consistently low American Customer Satisfaction Index score. David VanAmburg, managing director at ACSI, says that customer-satisfaction scores generally tend not to be much of an issue when you look at wireless service itself. But when you start to look at wireless companies that are also pay-TV and internet-service providers, such as AT&T and Verizon Communications Inc. -- which also has a red flag in customer satisfaction -- you start to see scores hit rock bottom. He says customers pay a lot for these services and expect a lot from them -- particularly now that they are home using them all day.

"And then we find that, generally speaking, the quality isn't up to our expectations," he says, adding that common complaints include spotty internet service and slow download speeds.

AT&T said in statement that "as of October 2020, our net promoter score (NPS) [from market-research firm Kantar] is up year-over-year across all of our products, and is at an all-time high for AT&T Fiber and wireless service." What's more, the company said, "J.D. Power's most recent study also ranked AT&T/DIRECTV number one nationally among TV providers and number one for broadband internet providers in every region we serve."

Verizon didn't respond to requests for comment.

Boeing Co.

Red Flag: Financial Strength

Struggling with the grounding of the 737 MAX following a pair of crashes, and fewer orders as the pandemic crippled air travel, Boeing earned a red flag for its financial performance, ranking in the 10.5th percentile. Boeing's struggles were reflected in multiple sources that Drucker looks at for financial strength, including total shareholder return and economic profit, which is calculated by corporate analytics firm ISS EVA, a division of Institutional Shareholder Services, and measures operating profit minus a charge for use of capital. Rich Cleary, a vice president at ISS Corporate Solutions, a division of ISS, says Boeing's defense business has remained relatively stable, "but, obviously, commercial aviation has taken a hit this year."

A representative for Boeing pointed to CFO Greg Smith's comments in the company's third-quarter earnings call: "We're taking comprehensive action to preserve liquidity, navigate the pandemic, adapt to our new markets, improve performance, and position our company for the future."

Bristol-Myers Squibb Co.

Red Flag: Customer Satisfaction

Bristol-Myers Squibb landed in the 20.7th percentile for customer satisfaction, which can be attributed in part to a low quality gap score from wRatings, which tracks how well a company meets customer expectations. Gary Williams, chief executive officer of wRatings, says Bristol-Myers's score was pulled down by changes in consumer expectations for the pharmaceutical industry amid the pandemic "and the lack of Bristol-Myers Squibb participation in the Covid vaccine development."

In a statement, the company said: "Bristol-Myers Squibb is participating in several cross-industry groups and public-private partnerships designed to foster collaboration and coordinate industry response efforts, and thereby accelerate the development, manufacturing, and delivery of diagnostics and treatments for Covid-19. Among other things, we identified more than 1,000 proprietary compounds to be made available to collaborators with high-quality assays to screen for possible molecules to treat Covid-19. We look forward to continued collaboration with the broader life-sciences community as we continue to advance our work on behalf of patients in our core therapeutic areas."

DuPont Co.

Red Flag: Financial Strength

DuPont's ranking in the 20.2nd percentile earned a red flag in financial strength. ISS's Mr. Cleary says that DuPont's financial position has been hurt by the pandemic, which forced it to idle some plants. It also is in the midst of a transformation, he says, following the merger with Dow Chemical Co. in 2017 and the subsequent spinoff of Dow Inc. and Corteva.

In a statement, a DuPont spokesperson said: "We are executing on a plan to strengthen our financial position that focuses on prudent cost actions, price discipline, continued investment in innovation and active portfolio management. We will continue to take actions within our control to keep our foundation for growth strong and will be ready to capitalize when certain markets begin to recover."

Facebook

Red Flag: Customer Satisfaction

Facebook sits in the 1.1 percentile for customer satisfaction, drawn down in part by a low net promoter score from J.D. Power.

Michael Vermillion, vice president of global business intelligence at J.D. Power, says Facebook likely is being hurt by a very low brand trust, which didn't improve as it sat at the center of the nation's political and cultural divide during the election season.

"To me, Facebook used to be a platform where I could share photos and experiences with friends and family," he says. This year, it turned into a place where you go to have arguments with strangers about politics, he says, adding "I spent a lot of time hiding posts or turning people off or turning off all the stuff I didn't want to see."

Facebook didn't respond to a request for comment.

Ford Motor Co.

Red Flag: Financial Strength

Ford Motor picked up a red flag for financial strength, scoring in the 22.3rd percentile. Mr. Cleary at ISS says Ford lost revenue as demand for new cars and trucks declined during the pandemic, contributing to a low economic profit score.

Ford spokesman T.R. Reid says the company isn't satisfied with its current performance and is in the midst of a companywide transformation.

"Pandemic or not, and by whatever measure, we can and have to create more value for everyone who relies on us, including investors," Mr. Reid says. "On the plus side, our balance sheet is very strong," he says, adding that "the strength of that balance sheet, the cash and liquidity that we not only had access to, but took advantage of, gave us the ability to not just withstand the pandemic, but to strategically invest in that better value creation that we think we're capable of."

General Electric Co.

Red Flag: Financial Strength

Sitting in the 10.3rd percentile for financial strength, General Electric drew a red flag for the category just as it did last year. Mr. Cleary says GE's turnaround efforts had been showing some promise, but the pandemic's effect on its aviation business -- previously a bright spot for the company -- has meant fewer engines sold and further declines for the company's economic profit.

"They had been moving in the right direction," he says, "but it seems Covid threw a wrench into those plans."

A GE spokesperson points to comments CEO Larry Culp made in an Oct. 28 earnings call: "We're encouraged by our progress amid a challenging backdrop. We remain focused on the long term, not only in terms of our ability to perform but to realize our purpose and the full potential of GE."

Molson Coors Beverage Co.

Red Flag: Financial Strength

Though Americans haven't been shy about increasing their consumption during the pandemic, it hasn't been enough to keep Molson Coors Beverage out of red-flag territory. The beer giant picked up a red flag for its financial strength, ranking in the 21.9th percentile. Anthony Campagna, ISS EVA's global director of fundamental research, says that while at-home consumption of beer has gone up during the pandemic, Molson's commercial business -- in bars, restaurants, venues, etc. -- has been hit hard by shutdowns.

But the company's core financial hangups stem from the merger of Molson and Coors in 2015, he says, adding that the merger hasn't yet provided the kind of cost savings that the company had hoped for. The company's share price, meanwhile, has been "meaningfully" underperforming the Russell 1000 for years, he says. And though Molson shares have seen a bit of improvement year to date, he notes that they are still underperforming both the S&P 500 and the Russell 1000.

Molson said in a statement that it has delivered more than $700 million in savings from 2017 to 2019, and is on target to generate $600 million in savings from 2020 to 2022. In addition, the company a year ago launched a revitalization plan to drive top-line growth. "The decisions we've made over the past year, and quick actions and investments we are making, helped us beat top- and bottom-line expectations last quarter, and we believe will ensure the Molson Coors Beverage Co. is built to succeed well into the future," the company said.

Owens Corning Inc.

Red Flag: Financial Strength

Mr. Campagna at ISS EVA says Owens Corning is in a good, profitable business, but over the past few years the company has seen its sales growth erode to the point where sales are now in decline. That was one contributing factor for Owens Corning's red flag in financial strength, where it ranked in the 22.2nd percentile.

Although consumers have been flooding home-improvement stores during the pandemic, Owens Corning, the maker of products such as roofing materials and Pink Panther-colored insulation, has been losing ground to competitors.

"As simply as I can put it, they're selling less things, less often [and] at lower prices," says Mr. Campagna.

In a statement, Owens Corning said: "In 2020, we have continued to execute well while adapting to dynamic and challenging market conditions that impacted our first-half results. We are encouraged by the recovery in many of our key markets and delivered strong financial results in the third quarter. We believe Owens Corning is well-positioned to capitalize on near- and longer-term opportunities to drive attractive returns for our shareholders."

Philip Morris International Inc.

Red Flag: Customer Satisfaction

Philip Morris International, which sells products such as Marlboro cigarettes outside the U.S., returns with another red flag for customer satisfaction this year, settling in the 2.3rd percentile. Its ranking was affected by a low quality gap score from wRatings. Mr. Williams, CEO of wRatings, says Philip Morris has continued to struggle to "break away from an industry that is seen as unhealthy," and he expects the company to have a low quality gap score until it expands its smoke-free product lines.

A spokesman for Philip Morris said in a statement that the company's goal "is to switch the world's one billion smokers, who don't quit, to better alternatives as quickly as possible. Replacing cigarettes with scientifically substantiated smoke-free products is at the very core of our corporate strategy and sits atop our sustainability priorities. We are disrupting our own company to move faster toward this ambition."

Verizon Communications Inc.

Red Flag: Customer Satisfaction

Like AT&T, Verizon Communications' low customer-satisfaction score -- it sits in the 24.1st percentile -- can be attributed to the low scores seen industrywide for providers of pay-TV and internet service, according to Mr. VanAmburg at ACSI. He also notes that being one of the biggest players in the wireless industry -- alongside AT&T -- has made it ripe for criticism. Now that T-Mobile, known for putting up high marks for customer satisfaction, has merged with Sprint, which is known for just the opposite, he says it will be interesting in years to come to see how the combined company's customer-satisfaction numbers compare with Verizon's and AT&T's.

Verizon didn't respond to requests for comment.

Workday Inc.

Red Flag: Financial Strength

The management-software company Workday put up a red flag for financial strength, landing in the 18.6th percentile, in part due to a below-average economic profit score. But Mr. Cleary at ISS notes that Workday is in a very different place than some of the other companies with red flags for financial strength.

Workday, he notes, is a young company, it is growing at a healthy clip and its profit is being held back not by lagging sales -- in fact, sales are growing steadily -- but by significant investment in property, plant and equipment and research and development, which isn't uncommon for growth-stage companies.

"They're still in that growth stage," he says, "where they're investing lots of capital, trying to get scale and grab market share before stabilizing."

Workday didn't respond to requests for comment.

Mr. Kornelis is a writer in Seattle. He can be reached at reports@wsj.com.

 

(END) Dow Jones Newswires

December 12, 2020 10:26 ET (15:26 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.