Hybrid Perspectives: GM vs. Ford
General Motors (GM) and Ford (F) are steering their formidable ships toward a hybrid and plug-in hybrid electric vehicle (PHEV) future. Both companies, stalwarts in the history of American autos, are navigating the choppy waters of consumer apprehension over electric vehicles (EVs). GM and F are adjusting their sails, acknowledging concerns over EV pricing and charging infrastructure.
At the Bernstein Annual Strategic Decisions Conference in late May, these automotive behemoths underscored their commitment to hybrids, with Ford demonstrating a more fervent belief in the potential of the technology.
Charting Growth Trajectories
GM charts a course to introduce plug-in hybrids by 2027, aligning with regulations and customer preferences during the shift to full electrification. CEO Mary Barra emphasized EVs as GM’s long-term focus, viewing hybrids as a necessary step, not the final destination. Barra astutely noted the dual propulsion systems of hybrids and the strategic capital allocation required.
Contrarily, Ford’s CEO, Jim Farley, sees hybrids as a permanent fixture in the company’s future, not just a temporary measure. Farley argues that hybrids are beyond mere transition, asserting that many U.S. hybrids are now more profitable than non-hybrid models. The success of hybrids like the F-150 hybrid drives this belief, offering features like exportable power, a boon for customers.
Investment Outlook: GM & F Analysis
GM and Ford are steering into the electrified sunset with a firm grip on their wheels. These legacy automakers understand the importance of robust offerings, cost controls, and a balanced approach to hybrids and EVs as they navigate the evolving automotive landscape. Their hybrid strategies could provide a competitive edge in the short term.
Both companies are seeing upward revisions in their fiscal estimates. Recent data shows a positive trend, with GM’s 2024 EPS estimates rising by 2 cents to $9.40 in the last month, and F’s estimates climbing by 3 cents to $1.97 over the same period.
Financially, GM and Ford stand on solid ground. GM closed Q1 2024 with total automotive liquidity of $33.3 billion, including $19.7 billion in cash/cash equivalents/marketable debt securities. Ford, on the other hand, ended the same quarter with $25 billion in cash and over $43 billion in liquidity.
Moreover, GM and F present enticing valuations with a Value Score of A. Looking at the Price/Earnings ratio, GM trades at 4.60 forward earnings, while Ford stands at 5.98, considerably lower than the industry average of 30.52. Both companies are attractively priced below their respective 5-year median values.
Shares of GM and Ford have displayed healthy gains in recent years, showing potential for further growth due to their affordable valuations and solid fundamentals. For investors eyeing these stocks, a dip in prices could offer a strategic opportunity for accumulation.
GM and F currently hold a Zacks Rank #3 (Hold) each. Considering their promising outlook, these auto giants remain compelling investment prospects, with their hybrid strategies potentially catalyzing future growth.