Despite high interest rates and inflation, the sector experienced robust growth last year. Potential interest rate cuts this year are noteworthy as they promise cheaper borrowing, further boosting industry prospects. Additionally, flexible financing, brand discounts, and higher EV sales are contributing to growth.
This year, the auto industry continues to face challenges such as a slowdown in global demand, intense competition, and supply constraints. However, it is showing resilience due to steady consumer demand, economic expansion, smart tech innovations, EV adoption, government incentives, and global supply chain enhancements, all of which are driving long-term growth.
Consequently, the global outlook for the auto industry remains positive, with solid growth expected to contribute to a 3% increase in global light-vehicle sales for 2024. The global automotive industry is projected to grow at a CAGR of 6.8%, reaching $6.86 trillion by 2033.
Furthermore, investors’ interest in auto stocks is evident from the First Trust S-Network Future Vehicles & Technology ETF’s (CARZ) 16.9% returns over the past year.
Given this backdrop, let’s compare two auto stocks, Ford Motor Company (F) and General Motors Company (GM), to understand why GM offers investors more growth potential.
The Case for Ford Motor Company Stock
Ford Motor Company (F) develops, delivers, and services a range of Ford trucks, commercial cars and vans, sport utility vehicles, and Lincoln luxury vehicles worldwide. It operates through Ford Blue, Ford Model E, Ford Pro, Ford Next, and Ford Credit segments.
F’s stock has declined 6.4% over the past month, closing the last trading session at $12.12. However, it has gained 19.8% over the past six months.
F’s revenue grew at a CAGR of 11.2% over the past three years. However, its net income declined at a CAGR of 0.5% over the past three years.
In terms of forward EV/EBIT, F is trading at 15.85x, 15.8% higher than the industry average of 13.69x. On the other hand, the stock’s forward non-GAAP P/E of 6.04x is 61.1% lower than the industry average of 15.52x.
In terms of the trailing-12-month Capex / Sales, F’s 4.82% is 57.8% higher than the 3.05% industry average. However, its 8.60% trailing-12-month gross profit margin is 76.5% lower than the 36.7% industry average. Also, the stock’s 1.57% trailing-12-month Return on Total Capital is 74.8% lower than the 6.24% industry average.
F’s total revenues for the first quarter (ended March 31, 2024) increased 3.1% year-over-year to $42.77 billion. However, its net income decreased 27.8% year-over-year to $1.30 billion. Its adjusted EBIT declined 17.6% from the year-ago value to $2.80 billion. The company’s adjusted EPS came in at $0.49, representing a decrease of 22.2% over the prior-year quarter.
For the quarter ending June 30, 2024, F’s revenue is expected to increase 3.9% year-over-year to $44.10 billion. Its EPS for the same quarter is expected to decrease 9% year-over-year to $0.66.
F’s stock is trading below its 100-day moving average of $12.25 but above its 200-day moving average of $11.81.
F’s POWR Ratings reflect uncertainty. It has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Value and Sentiment. Within the Auto & Vehicle Manufacturers industry, F is ranked #33 out of 52 stocks. To see F’s rating for Growth, Momentum, Stability, and Quality click here.
The Case for General Motors Company Stock
General Motors Company (GM) designs, builds, and sells trucks, crossovers, cars, and automobile parts; and provides software-enabled services and subscriptions worldwide. The company operates through GM North America, GM International, Cruise, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Baojun, and Wuling brand names.
GM’s stock has gained 56.8% over the past six months to close the last trading session at $44.07.
GM’s revenue and EPS grew at a CAGR of 12.7% and 9.4% over the past three years, respectively.
In terms of forward non-GAAP PEG, GM's 0.41x is 73% lower than the 1.53x industry average. Likewise, its 0.28x forward Price/Sales is 66.6% lower than the 0.85x industry average.
GM’s 6.13% trailing-12-month net income margin is 33.1% lower than the 4.60x industry average. Similarly, its 6.47% trailing-12-month Capex / Sales is 112.1% higher than the 3.05% industry average. Also, the stock’s 15.57% trailing-12-month Return on Common Equity is 38.4% higher than the 11.25% industry average.
For the fiscal first quarter that ended on March 31, 2023, GM’s revenues increased 7.6% year-over-year to $43.01 billion. Its adjusted automotive free cash flow stood at $1.09 billion, compared to an adjusted automotive free cash flow deficit of $132 million in the year-ago quarter.
For the same quarter, its net income attributable to stockholders increased 24.4% year-over-year to $2.98 billion. also, its adjusted EPS came in at $2.62, representing an increase of 18.6% year-over-year.
Street expects GM's EPS for the quarter ending June 30, 2024, to increase 37.5% year-over-year to $2.63. Likewise, its revenue for the same quarter is expected to increase marginally year-over-year to $45.20 billion. It surpassed the Street EPS estimates in each of the trailing four quarters.
GM’s stock is trading above its 100-day and 200-day moving averages of $41 and $36.40, respectively.
GM's POWR Ratings reflect its positive outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system.
In the same industry, GM is ranked #15. It has a B grade for Growth, and Value. Click here to see GM's Momentum, Stability, Sentiment, and Quality ratings.
F vs. GM: Which Stock Offers Investors More Growth Potential?
Despite challenges, the auto industry shows promise due to technological advancements in electric and hybrid vehicles, which offer improved efficiency and reduced emissions. Innovations in connectivity and excitement about autonomous driving is attracting consumers.
Additionally, rising demand in emerging markets and government incentives further fuel growth, positioning F and GM to benefit from these favorable tailwinds.
GM’s robust historical growth, stronger financial position, solid profitability, attractive valuation, and positive momentum make it a superior choice as compared to F. However, F is worth adding to your watchlist.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Auto & Vehicle Manufacturers industry here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GM shares were trading at $44.23 per share on Friday afternoon, up $0.50 (+1.14%). Year-to-date, GM has gained 23.50%, versus a 11.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
Does Ford (F) or General Motors (GM) Offer Investor More Growth Potential? StockNews.com
