Ford Vs General Motors: Which Auto Stock is the Better Investment After Q2 Earnings?
Specifically, Ford F and General Motors GM are two value stocks that may be of consideration, with both auto giants exceeding their Q2 expectations over the last week.
Fighting to overcome tariff challenges, let's see which of these renowned automakers may be the better investment at the moment.
Ford & GM's Favorable Q2 Results
Releasing its Q2 report on Wednesday evening, Ford's Q2 sales rose 5% year over year to $46.94 billion and impressively topped estimates of $41.72 billion by 12%. However, tariff costs of $800 million dented Ford's bottom line with Q2 earnings of $0.37 per share dipping from EPS of $0.47 a year ago despite eclipsing expectations of $0.34.
Pivoting to General Motors, which reported Q2 results last Tuesday, the company was hit with $1.1 billion in tarriffs, although Q2 EPS of $2.53 comfortably exceeded expectations of $2.39 by 6% but fell 17% from $3.06 a share in the prior period. This came on Q2 sales of $47.12 billion, which eclipsed estimates of $46.24 billion but dipped 2% YoY.
Ford's Reinstated Guidance
Optimistically, Ford reinstated its full-year guidance after previously suspending it due to tariff uncertainty. This includes adjusted EBIT of $6.5-$7.5 billion, revised down from a previous range of $7-$8.5 billion, and takes into account an estimated $2 billion net tariff-related impact. Additionally, Ford forecasts adjusted free cash flow at $3.5-$4.5 billion, with capital expenditures of around $9 billion.
GM Reaffirmed Its Guidance
Reaffirming its full-year guidance, General Motors still expects FY25 adjusted EBIT at $8.2-$10.1 billion. Even better, General Motors reaffirmed its annual net income guidance, which it raised in May to $11.2-$12.5 billion from a previous range of $10.4-$11.1 billion. Notably, General Motors' guidance accounts for an estimated $5 billion tariff-related hit.
Ford & GM Stock Performance
Countering the lackluster year to date performance of their Zacks Automotive-Domestic Market peers (18% Decline), Ford stock is up a very respectable +11% to around $11 a share, with General Motors shares virtually flat at around $53. Notably, Ford stock has also edged the benchmark S&P 500's gains of +8% this year.
However, when looking at a longer view, over the last five years, General Motors' stock is up over +100%, which has edged the broader market and the Automotive-Domestic Market's returns of +73% while Ford's +65% has been subpar.
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EPS Outlook & P/E Valuation Comparison
At current levels, General Motors' 5.5X forward earnings multiple stands out with annual EPS expected to dip 11% in FY25 but projected to stabilize and rise 3% in FY26 to $9.69.
Still, Ford's 9.5X forward earnings multiple is also below the industry average of 12X, even with FY25 EPS currently expected to drop 38% to $1.14 versus $1.84 per share last year. Plus, Ford's annual EPS is forecasted to rebound and rise 13% in FY26 to $1.28.
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Dividend Comparison
General Motors has the more attractive EPS outlook and P/E valuation, but Ford's dividend tips the scales with a yield of 5.52%. This towers over General Motors' 1.15% annual yield and the S&P 500's 1.16% average. That said, General Motors' dividend is generous in its own right, as most automakers don't offer a payout, including Tesla TSLA.
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Conclusion & Final Thoughts
Following their Q2 reports, Ford and General Motors stock both land a Zacks Rank #3 (Hold). Offering sound value to investors, these auto giants are still worthy of spots in the portfolio, especially as it relates to long-term positions.
Regarding which may be the better investment, General Motors' potential is more appealing considering its robust bottom line, although income investors may certainly be more drawn to Ford's stock.
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