StocksRunner logo
mail
 
menu
 
 
 
 
»
 

Ford Uphill Battle: Can the Automaker Close the Performance Gap with GM?

 
  • user  David.Mitchell
  •  
    David.Mitchell  David.Mitchell
     
      
     
     
     

    David Mitchell is a seasoned financial analyst with a specialization in the Motor Vehicles industry. With a robust background in finance and a keen eye for market trends, David has established himself as a trusted expert in navigating the complexities of the automotive sector.

     
 
 
 

stocks on the run

 
 
 

Key Highlights:

 
•  
Ford stock has underperformed General Motors by 21% year-to-date
 
•  
Both companies are profitable, but GM boasts higher profit margins
 
•  
GM aggressive share buyback program contrasts with Ford's dividend strategy
 
•  
Analysts are divided on Ford's potential to narrow the gap
 

The Tale of Two Auto Giants

 

The rivalry between Ford and General Motors (GM) has been a constant for decades. However, recent market performance has highlighted a growing disparity between these two American icons. As of mid-2024, Ford's stock has climbed a respectable 15% since the beginning of the year, but this pales in comparison to GM's impressive 36% surge. This stark contrast has left investors and analysts questioning: Can Ford close the gap, or is GM pulling away for good?

 

At first glance, the financial fundamentals of both companies appear similar. Both Ford and GM are profitable and experiencing growth, with Ford expected to generate profits of about $22 billion in 2024-2025, while GM is projected to reach $26 billion during the same period. Both automakers have also made significant inroads into the electric vehicle market, positioning themselves for future growth in this crucial sector.

 

However, a closer examination reveals two key differences that may explain the performance gap:

 

Profit Margins: GM currently boasts a net profit margin of 6.3%, nearly triple Ford's 2.21%. This substantial difference in profitability is a major factor in investor sentiment.

 

Capital Return Strategies: GM has announced an aggressive $16 billion share buyback program, equivalent to about 30% of its market value. In contrast, Ford has maintained its traditional dividend approach, offering a quarterly dividend of $0.15 per share and a special dividend of $0.18 per share announced in May. At current prices, this translates to a dividend yield of approximately 2.4%.

 

Ford Roadmap to Improvement

 

Under the leadership of CEO Jim Farley, who took the helm in October 2020, Ford is actively working to narrow these gaps. The company has outlined several initiatives aimed at boosting profitability and shareholder value:

 
•  
Cost-cutting measures: Ford plans to reduce costs by $2 billion.
 
•  
Operational efficiency: The company aims to lower its cost of sales from 3.5% to levels more in line with competitors like GM (3%) and Toyota (1%).
 
•  
Electric vehicle strategy: Ford is committed to reducing losses in its EV division, which reported a $1.3 billion loss in the most recent quarter.
 

If successful, these efforts could potentially increase Ford's operating profit by $1-2 billion, pushing net profit to around $11 billion in 2024, up from the previously expected $8 billion.

 

The broader U.S. auto market is expected to provide a boost to both Ford and GM. Industry projections suggest new car sales in the United States will grow to 16 million units in 2024, up from 15.5 million in 2023. By 2028, this figure could reach 17 to 18 million cars annually, offering significant growth potential for both automakers.

 

Analyst Perspectives: A Mixed Bag

 

Despite the clear performance gap, analysts are divided on Ford's prospects for narrowing the divide with GM. Here's a breakdown of some key analyst opinions:

 

Adam Jones, Morgan Stanley:

 
•  
Sees an opportunity for Ford to close the gap through capital discipline
 
•  
Recommends focusing on improving EV profitability, enhancing overall profit margins, and increasing shareholder returns
 
•  
Sets a target price of $17 per share with a buy recommendation
 

Mike Ward, Freedom Capital Markets:

 
•  
Skeptical of Ford matching GM's buyback strategy due to the Ford family's 40% voting rights and preference for dividends
 
•  
Highlights potential for growing special dividends, with Ford expected to generate $21 billion in free cash flow over the next three years
 

John Murphy, Bank of America:

 
•  
Gives Ford a buy recommendation
 
•  
Expects the company to benefit significantly from increasing U.S. auto sales
 
•  
Sets an ambitious target price of $21 per share, implying a 60% upside
 

Despite these positive outlooks, the majority of analysts covering Ford (18 out of 24) maintain a hold recommendation. The average target price of $12.58 per share actually falls below the current stock price, indicating a degree of skepticism about Ford's near-term prospects.

 

Conclusion: A Long Road Ahead

 

While Ford has clearly lagged behind GM in recent stock performance, the company is not standing idle. With a focused strategy to improve profitability, enhance shareholder returns, and capitalize on the growing U.S. auto market, Ford has the potential to narrow the gap with its longtime rival.

 

However, investors should approach Ford stock with cautious optimism. The company faces significant challenges in improving its profit margins and convincing Wall Street that it can execute its turnaround plans effectively. While some analysts see substantial upside potential, the majority view suggests that Ford still has much to prove.

 

As the automotive industry continues to evolve, particularly with the shift towards electric vehicles, both Ford and GM will face ongoing challenges and opportunities. For investors, closely monitoring Ford's progress in implementing its improvement initiatives and its success in the EV market will be crucial in determining whether the company can indeed close the performance gap with GM in the coming years.

 
 

F Stock Analysis

 
Last Price
Change
 
10.68
+0.56%

 

Total Score

 
 
score
3.78
 
StocksRunner Raring Score
Strong Sell
Hold
Strong Buy
 
 
 

Strengths

 

Rewards

 Earnings are forecast to grow

Rewards

 Investors confidence is positive

Rewards

 Outperform the market

 
 

Risk Level

 
Risk Level
LOW
HIGH
 

F has Low Risk Level. Click here to check what is your level of risk

 

Unlock insights and stay ahead in the stock market game. Click Here For More F in-depth stock analysis.

 
 

stocks on the run

 
 
 

Unlock Exclusive Stock Insights!

Join StocksRunner.com for daily market updates, expert analyses, and actionable insights.

Signup now for FREE and stay ahead of the market curve!


Why Join?

Find out what 10,000+ subscribers already know.

Real-time insights for informed decisions.

Limited slots available, SignUp Now!

 
Signup to Stocksrunner
 
 

Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

 
 
StocksRunner

Get all the pieces of the puzzle on important data activity and Stay Ahead: Stock Market Updates, Expert Analysis, and Future Predictions

 

FIND US ON

StocksRunner on Facebook StocksRunner on Twitter StocksRunner on YouTube StocksRunner on stocktwits StocksRunner Rss
 

Stay Informed with StocksRunner

Unlock the knowledge that 10,000+ subscribers already cherish. Join for exclusive insights and stay ahead in the stock game! Enter your email to receive daily alerts

 
Our Services

Real-time stock market updates

Expert stock analysis

Investment strategies

Top stock recommendations

In-Depth Stock Analysis

Stock Sentiment Visualization

Daily Alerts for Stock Market Insights

 
About StocksRunner

Log In

Sign Up

Plans & Pricing

Contact Us

Terms of use

Privacy Policy

 
 

Disclaimer: Past performance, whether actual or indicated by historical tests, is not indicative of future success. Results are based on strategies not previously available to investors and may not reflect actual investor returns. Readiness and Sentiment Indicators, as well as the total score, are calculated using historical data and assumptions integral to the model, and they may be subject to losses. Active trading may not be suitable for individuals with limited resources, investment experience, or a low-risk tolerance. Your capital is at risk.

Please note that StocksRunner and its affiliates ("TS") do not offer, solicit, or endorse securities, derivatives, investment advice, or strategies of any kind. This information is for illustrative purposes only. Do not rely on it for investment decisions. Before making any investment, we recommend considering its appropriateness for your situation and seeking relevant financial, tax, and legal advice.

 
 
StocksRunner logo

StocksRunner

Get the pulse of the market

 
 
 
StocksRunner

Find out what happening right now and get all the pieces of the puzzle on important data activity before the major news sources break the story and see what are the trends

FIND US ON

StocksRunner on Facebook StocksRunner on Twitter StocksRunner on YouTube StocksRunner on stocktwits StocksRunner Rss

 

Receive our Daily Alerts

Unlock the knowledge that 10,000+ subscribers already cherish. Join for exclusive insights and stay ahead in the stock game! Enter your email to receive daily alerts

 
Market trends

In-depth stock analysis

Informed investment decisions

Stock market insights

Stock trading tips

Stocks analysis

Stocks trends

Stocks performance

Stocks analysis

Investment strategies

Stock strategies

Trading strategies

StocksRunner updates

StocksRunner ideas

Financial Reports

 
 

Disclaimer: The Score performance whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The Readiness Indicators, Sentiment Indicators and total score are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Active trading is generally not appropriate for someone of limited resources, limited invesment or trading experience, or low-risk tolerance. Your capital may be at risk.

Please note that no offer or solicitation to buy or sell securities, securities derivatives of future products of any kind, or any type of trading or invesment advise, recommendation or strategy, is made, given or endorsed by StocksRunner including any of their affiliates ("TS").

This information is provided for illustrative purposes only. You should not rely on any advice and/or information contained in this website and before making any investment decision. we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.