When it comes to iconic American automakers, General Motors GM and Ford F stand as titans of the industry. Both companies have weathered economic storms, embraced innovation and are navigating the shift toward electric vehicles (EVs). However, F and GM’s stock performances in 2024 tell different stories.
Year to date, GM has surged 54%, outperforming the industry’s growth of 21.6%, while Ford has declined 8.7%.
YTD Price Performance Comparison
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Both these stocks are trading at attractive valuations now, but one appears better positioned to deliver superior returns. If you’re undecided about investing in GM or F, here’s a closer look into their fundamentals, growth prospects and challenges.
A Comparative Analysis Between F & GM
9-Month Results Review & Full-Year Outlook
In 2024, General Motors has demonstrated operational excellence and financial resilience. Revenues for the first nine months totaled $139 billion, up from $128 billion a year ago, with net income climbing to $8.9 billion from $8 billion. GM’s ability to surpass earnings expectations in each of the trailing three quarters reflects its robust demand and effective cost management.
Ford’s results paint a contrasting picture. While revenues rose year over year to $130 billion, net income fell to $4.1 billion from $4.9 billion in the same period in 2023. Warranty costs and escalating EV losses hindered Ford’s performance. Over the trailing three quarters, Ford missed earnings estimates once, matched once and topped in the other.
GM is proving itself to be operationally better than its crosstown rival. It is also on track to set an annual record for profitability. GM’s cost-cutting initiatives have proven highly effective. The company is on track to achieve $2 billion in net cost reductions by the end of 2024, having already realized $1 billion in 2023.
Meanwhile, Ford’s CFO, John Lawler, acknowledged on the lastearnings callthat while Ford achieved a $2 billion reduction in material and manufacturing costs, these improvements have been largely offset by inflation and warranty-related expenses. These factors have curtailed Ford’s ability to achieve record financial performance this year.
Amid these cost headwinds, Ford cut its overall EBIT forecast for 2024. The company expects EBIT from the Ford Blue unit to decline from $7.5 billion in 2023 to $5 billion this year due to higher product manufacturing and warranty costs. In contrast, GM raised its full-year outlook, projecting adjusted EBIT between $14 billion and $15 billion and adjusted EPS in the $10-$10.50 range.
Electrification Business
General Motors is advancing well in its electrification journey. It aims to improve sales and profitability in its EV business by reducing battery costs, introducing new models and expanding its scale. GM plans to produce approximately 200,000 EVs in 2024 and is also on track to make its EVs profitable on an EBIT basis by the end of 2024.
Meanwhile, Ford’s EV business division — Ford Model e — is dragging the company’s overall results. The unit incurred losses of $4.7 billion in 2023 owing to high investments in next-gen products. Ford anticipates full-year loss from the Model e unit to widen to around $5 billion, exacerbated by ongoing pricing pressure and increased investments in next-generation EVs.
Balance Sheet Strength
Both automakers possess strong liquidity to weather short-term challenges. General Motors had total automotive liquidity of $40.2 billion as of Sept 30, 2024, including around $23.7 billion of cash/cash equivalents/marketable debt securities. Ford ended third-quarter of 2024 with around more than $46 billion in liquidity, including $28 billion in cash.
However, GM’s lower long-term debt-to-capitalization ratio compared to Ford provides it with greater financial flexibility.
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Dividend and Buyback Appeal
Ford has a high dividend yield of more than 5%, way better than the S&P 500’s yield of 1.19% on average. The company targets distributions of 40-50% of FCF going forward, demonstrating its commitment to shareholder return. Meanwhile, GM has a dividend yield of less than 1%.
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However, while Ford focused on dividends, GM prioritized stock buybacks. The company has bought back shares worth around $12.5 billion since last November and is expected to continue its buyback spree in the foreseeable future. As of third-quarter end, GM had $5 billion remaining under its share repurchase program.
GM’s strategy has effectively reduced its outstanding shares, boosting per-share earnings and enhancing shareholder value. GM had 1.1 billion shares outstanding at the end of the third quarter of 2024, down from 1.5 billion at the start of 2021. In contrast, Ford's share count has remained steady at 3.9 billion over the same period.
A Look into Valuation
F is trading at a forward earnings multiple of 6.41X, below its median of 6.74X over the last three years. GM’s forward earnings multiple sits at 5.3X, slightly above its median of 5.16X over the last three years. Meanwhile, the industry’s forward earnings multiple is 44.3X.
GM & F's P/S Vs. Industry
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So, both stocks are trading cheap when compared to the industry and have a Value Score of A. But is it really a value stock or just a trap? The key is to look at the earnings growth that is expected for next year.
EPS Estimates
The Zacks Consensus Estimate for F’s 2024 and 2025 EPS implies a year-over-year decline of 10% and 4.4%, respectively. The consensus estimate for 2024 and 2025 EPS has been witnessing a downward trend.
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Meanwhile, the consensus mark for GM’s 2024 and 2025 EPS implies a year-over-year uptick of 34.7% and 1.4%, respectively. The estimate for 2024 and 2025 EPS has been witnessing an upward trend.
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Our Pick: GM
Between these two automotive giants, General Motors emerges as the stronger contender for investors seeking growth and stability. Its consistent earnings beats, upward EPS revisions, disciplined cost management and strides in EV profitability highlight its operational resilience and market leadership. General Motors held the largest share of the U.S. auto market at 16.2% in 2023. Its EV strides are also turning out better. General Motors has surpassed Ford in total U.S. EV sales so far this year, trailing only Tesla. GM has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ford, despite its rich dividend yield, faces significant near-term challenges. Persistent EV losses, rising warranty costs and inflationary pressures have dampened its financial performance and growth outlook. While its long-term prospects remain tied to the success of its electrification strategy, the current headwinds present a cautionary tale. Ford carries a Zacks Rank #5 (Strong Sell).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
