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Ford (F) Gains on Sales Jump as General Motors (GM) Slips

NEW YORK (TheStreet) -- September U.S. sales figures for automaker Ford  (F) came in better than expected, up 5.8% to 185,146 vehicles despite forecasts for a flat month. The increase marks Ford's best September since 2006 and the eleventh consecutive month of year-on-year sales increases. Popular brands Fusion, up 62% over last year, and Fiesta, up 29%, posted the largest increases.

General Motors  (GM) experienced weaker September sales, down 11% to 187,195 despite estimates of a 4.2% decline.

"We held our own when it comes to retail market share this month," Vice President Kurt McNeil said in a statement. "We expect a strong finish to the year and more growth in 2014 thanks to new products and a healthier economy."

Ford shares jumped 2% to $17.21, while General Motors moved 0.67% lower to $35.73, as of 1 p.m. EST.

'Real Money' contributor Sham Gad says the auto industry has been one of the strongest comebacks during the U.S. economic recovery. "Over the next several years, U.S. auto sales should continue to show respectable growth," he says.  

TheStreet Ratings team rates Ford as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: "We rate Ford (F) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.2%. Since the same quarter one year prior, revenues rose by 14.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 72.52% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, F should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 55.68% to $6,078 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 18.02%.
  • Ford has improved earnings per share by 15.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Ford reported lower earnings of $1.42 vs. $5.01 in the prior year. This year, the market expects an improvement in earnings ($1.54 vs. $1.42).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Automobiles industry average, but is greater than that of the S&P 500. The net income increased by 18.6% when compared to the same quarter one year prior, going from $1,040 million to $1,233 million.

TheStreet Ratings team rates General Motors as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: "We rate General Motors (GM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GM's share price has jumped by 57.97%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $4,893 million or 24.12% when compared to the same quarter last year. In addition, General Motors has also modestly surpassed the industry average cash flow growth rate of 18.02%.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.

Written by Keris Alison Lahiff.

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