GM Vs Ford Stock: Which Is Best?

It’s no longer a mystery why the automobile industry is transitioning to electric vehicles. While established auto manufacturers are busy electrifying their models to grab a bigger share of the massive market, plenty of new entrants in this space have made the competition stiff.  

A window of opportunity exists in the automotive market right now, with EV leader Tesla, Inc. (NASDAQ:TSLA) experiencing issues as it aggressively cut prices to stay ahead of the competition, which has impacted its margins.

Against this backdrop, we look into well-established auto stalwarts General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) to deduce which one is the better buy at the moment.

GM Rose Like The Phoenix From The Ashes

General Motors has a long history of manufacturing commercial vehicles. The company has developed a strong brand presence, selling vehicles under brand names like Chevrolet, Cadillac, Buick, and GMC over the years.

After reporting losses for several years, General Motors declared bankruptcy in 2009, which was a shock to the global auto industry. Even $19.4 billion Federal support was not sufficient to keep the company away from bankruptcy.

On the other hand, to its immense credit, General Motors’ rise back to the top has also been nothing short of stellar. As a result, General Motors held the largest share of the U.S. auto market last year, at 16.9%, becoming the most successful carmaker in the country for 2023.

GM Growth Slowing But Still Trending Right

The company’s annual revenue growth decelerated, but remains near double-digits. In fiscal 2022, General Motors’ revenue increased by 23.4% from the prior year to $156.74 billion. On a percentage basis, it slowed to just 9.6% in fiscal 2023 to $171.84 billion.

Adjusted EPS for fiscal 2022 was at $7.59, rising 7.4% from fiscal 2021. For the last fiscal year, EPS growth slowed to just 1.2%, coming in at $7.68 per share. This figure aligned with the company’s $7.20-$7.70 guidance and topped analysts’ $7.55 forecasted value.

General Motors also generated a robust adjusted automotive free cash flow of $11.67 billion, topping management’s guidance of $10.5-$11.5 billion.

On the other hand, the company’s net income margin has been contracting. In 2021, its net income margin stood at 7.9%. A year later, it fell to 6.3% and by 2023, it further declined to 5.9%.

Best Quarterly Report In Years

General Motors posted the best Q1 retail sales in the first quarter this year since 2021, experiencing growth across its Chevrolet, Cadillac, Buick, and GMC brands.

The luxury end of the market deserved the plaudits with the high-end Cadillac LYRIQ model posting its best-ever quarterly sales and outperforming competitors. Nonetheless, this market may well be upended when the affordable Chevrolet Equinox EV starts shipping to dealers in the first half of this year.

Last year, the company expected new labor contracts with the United Auto Workers and Canadian union to increase costs by $9.3 billion and approximately $575 in costs per vehicle during the terms of the deals but these costs will likely be stretched over a long time period.

Is Ford Motor Company’s Hybrid Push Paying Off?

With one of the most recognizable brand symbols in the “blue oval,” Ford has long been a paragon of U.S.-produced commercial vehicles, not least thanks to its portfolio of Ford and Lincoln vehicles.

Like its prime competitor General Motors, the company’s mid-2000s performance was questionable. While it did not file for bankruptcy, it did post a record loss of more than $12 billion in 2006.

Since then, the company has been on a rebuilding path but the recovery has been checkered, with the global shutdowns in the 2020-21 era significantly affecting sales.

Thereafter, the company increased both top and bottom-line results. For fiscal 2022, Ford Motor’s total revenues increased by 15.9% year-over-year to $158.06 billion, while for fiscal 2023, the figure reached $176.19 billion, increasing by 11.5% from the prior year.

As for the bottom-line performance, it has also been impressive. In 2022, Ford Motor’s adjusted earnings per share improved by 18.2% from 2021 to $1.88. Adjusted EPS grew by 6.9% to $2.01 in 2023.

Ford’s e-Segment Leading The Charge

Ford’s Model e segment, which is experiencing solid revenue growth, posted an EBIT loss of $4.7 billion because of a competitive pricing environment.

Meanwhile, the gas and hybrid vehicle business, Ford Blue, benefitted last year due to its growing hybrid business. The company’s F-150 model’s hybrid version and Maverick pickups were the best performers.

For the first quarter of 2024, Ford Motor reported a 42% year-over-year jump in its hybrid sales to 38,421 units, recording the best-ever quarterly hybrid sales. Maverick truck sales increased by 77% from the year prior, becoming America’s best-selling hybrid truck for the quarter.

Boosted by the performance of its hybrid models, the company is betting increasingly on new models of this kind. Its new F-150 is expected to be a frontrunner, alongside the new Ranger and Lincoln Nautilus, with more models in the pipeline.

It seems like the company’s focus has shifted from EVs to hybrids. Lending more credit to this fact is Ford Motor’s ambitious aim of offering hybrid powertrains across its North American Ford Blue lineup by the end of this decade, while at the same time, Ford pushed back the launch date of its three-row EVs from 2025 to 2027, expecting the market for three-row EVs to further develop in the meantime.

GM vs Ford Stock, Which Is Best?

GM appears to be a better buy than Ford according to analysts, who collectively assess to have 6.0% upside versus 3.2% downside for Ford.

Of the 22 Wall Street analysts rating General Motors, 13 rated the stock as “Buy.” Its price target of $52.38 indicates an 18.4% potential upside.

On the other hand, only five out of the 22 analysts rated Ford Motor a “Buy.” Ford’s price target of $13.74 per share indicates a modest 3.5% potential upside.

GM has returned 23.1% to investors year-to-date, much higher than the SPDR S&P 500 ETF Trust’s (NYSEARCA:SPY) 9.1%. But, with an 8.9% rise, F failed to beat the broader market this year.

Both stocks are trading at levels to attract bargain investors. In terms of forward non-GAAP P/E, General Motors is trading at 4.95x, way below the industry peers. A forward non-GAAP PEG of just 0.45x confirms that the company’s growth potential is yet to be priced in.

On the other hand, Ford is trading at 7.19x forward non-GAAP EPS, while its forward non-GAAP PEG stands at 1.46x.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.