GM Vs. F: Which Auto Giant is a Better Buy Before Q4 Earnings?

Core Viewpoint - Investors are focusing on General Motors (GM) and Ford (F) as the fourth-quarter 2024 earnings season for the auto sector begins, with GM set to report results first, followed by Ford [1] General Motors (GM) - The Zacks Consensus Estimate for GM's Q4 earnings is $1.75 per share and revenues of$43.8 billion, with a history of surpassing EPS estimates in the last four quarters by an average of 17.54% [2] - GM's fourth-quarter adjusted EBIT is projected to exceed $2.3 billion, indicating a 33$2 billion [12] Ford (F) - The consensus estimate for Ford's Q4 EPS is 34 cents, with revenues expected to be $43.6 billion; however, Ford's earnings surprise history is less favorable, having beaten estimates twice in the last four quarters [3] - Ford has cut its full-year 2024 EBIT forecast to around$10 billion due to high warranty costs and inflation, with anticipated declines in revenues from its Ford Blue and Model e units of 2% and 23%, respectively [7] - The Ford Pro segment is performing well, with expected revenue growth of 7% to $16.4 billion, driven by strong demand and successful product launches [8] - Ford has a Zacks Rank of 4 (Sell) and an Earnings ESP of 0.00%, suggesting a lower probability of an earnings beat [4] - Despite a dividend yield of over 5%, Ford faces significant challenges, including widening losses in its EV business and high warranty costs due to quality issues [14] Valuation Comparison - GM shares are trading at a Price/Earnings ratio of 5X forward earnings, below its 3-year high of 7.83X, while Ford trades at 5.91X forward earnings, also below its 3-year high; GM appears more attractive in terms of valuation [15] Conclusion - General Motors is viewed as a better investment choice compared to Ford, given its market leadership, solid earnings history, and commitment to cost reductions, while Ford's persistent EV losses and rising warranty costs present significant risks [17]