Ford or General Motors: Which Auto Stock Deserves Your Cash Now?

Core Insights - General Motors (GM) has significantly outperformed Ford (F) in stock performance in 2024, with GM's stock surging 54% compared to Ford's decline of 8.7% [1] - GM's operational excellence and financial resilience are highlighted by its revenue growth and net income increase, while Ford faces challenges with rising costs and declining net income [4][5] Financial Performance - GM's revenues for the first nine months of 2024 reached $139 billion, up from$128 billion, with net income increasing to $8.9 billion from$8 billion [4] - Ford's revenues rose to $130 billion, but net income fell to$4.1 billion from $4.9 billion, impacted by warranty costs and EV losses [5] Cost Management - GM is on track to achieve$2 billion in net cost reductions by the end of 2024, having already realized $1 billion in 2023 [6] - Ford's cost reductions have been offset by inflation and warranty-related expenses, leading to a cut in its EBIT forecast for 2024 [7][8] Electrification Strategy - GM plans to produce approximately 200,000 EVs in 2024 and aims for profitability in its EV business by the end of 2024 [10] - Ford's EV division, Model e, is expected to incur a full-year loss of around$5 billion due to high investments and pricing pressures [11] Balance Sheet Strength - GM had total automotive liquidity of $40.2 billion as of September 30, 2024, while Ford had over$46 billion in liquidity [12] - GM's lower long-term debt-to-capitalization ratio provides it with greater financial flexibility compared to Ford [12] Shareholder Returns - Ford offers a high dividend yield of over 5%, targeting distributions of 40-50% of free cash flow [14] - GM has prioritized stock buybacks, repurchasing shares worth around $12.5 billion since last November, with$5 billion remaining under its buyback program [16] Valuation Metrics - Ford is trading at a forward earnings multiple of 6.41X, while GM's forward earnings multiple is at 5.3X [18] - Both stocks are considered cheap compared to the industry average forward earnings multiple of 44.3X [21] Earnings Estimates - The consensus estimate for Ford's EPS implies a year-over-year decline of 10% for 2024, while GM's EPS estimates indicate a year-over-year increase of 34.7% [22][29] Market Position - GM holds the largest share of the U.S. auto market at 16.2% in 2023 and has surpassed Ford in total U.S. EV sales this year [32] - Ford faces significant near-term challenges due to persistent EV losses and rising costs, impacting its financial performance [33]