Three Buy-Rated Automakers For 2014

NEW YORK (TheStreet) -- TheStreet reiterates its buy ratings for Ford Motor Co (F), Toyota Motor Corp (TM) and General Motors (GM) ahead of 2014.

Year to date, Ford climbed 28.1%, Toyota added 27.9%, and General Motors soared 38.9%.

By Friday's market close, Ford had added 1.2% to $16.59, Toyota was off 0.93% to $119.22, and General Motors ended the session flat at $40.04.

TheStreet Ratings team rates Ford Motor Co as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate Ford Motor Co (F) a BUY. This is driven by a few notable 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, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had subpar 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 12.4%. Since the same quarter one year prior, revenues rose by 11.8%. 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, F's share price has jumped by 48.01%, 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, 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 increased to $3,840 million or 12.05% when compared to the same quarter last year. Despite an increase in cash flow, Ford Motor Co's cash flow growth rate is still lower than the industry average growth rate of 31.30%.
  • Ford Motor Co's earnings per share declined by 24.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, Ford Motor Co reported lower earnings of $1.42 a share vs. $5.01 a share in the prior year. This year, the market expects an improvement in earnings ($1.67 vs. $1.42).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Automobiles industry and the overall market, Ford Motor Co's return on equity significantly exceeds that of both the industry average and the S&P 500.

TheStreet Ratings team rates Toyota Motor Corp as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate Toyota Motor Corp (TM) a BUY. This is driven by a few notable 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 solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • Powered by its strong earnings growth of 32.55% and other important driving factors, this stock has surged by 42.60% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • Toyota Motor Corp has improved earnings per share by 32.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Toyota Motor Corp increased its bottom line by earning $6.46 a share vs. $2.19 a share in the prior year. This year, the market expects an improvement in earnings ($11.30 vs. $6.46).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Automobiles industry average. The net income increased by 32.8% when compared to the same quarter one year prior, rising from $3,398 million to $4,513 million.
  • Net operating cash flow has increased to $9,638 million or 35.7% when compared to the same quarter last year. In addition, Toyota Motor Corp has also modestly surpassed the industry average cash flow growth rate of 31.3%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Automobiles industry and the overall market on the basis of return on equity, Toyota Motor Corp has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

TheStreet Ratings team rates General Motors Co as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate General Motors Co (GM) a BUY. This is driven by a number of 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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had subpar 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 12.4%. Since the same quarter one year prior, revenues slightly increased by 3.7%. 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 56.36%, 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.87, 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.
  • Net operating cash flow has increased to $3,860 million or 14.09% when compared to the same quarter last year. Despite an increase in cash flow, General Motors Co's cash flow growth rate is still lower than the industry average growth rate of 31.3%.
  • General Motors Co's earnings per share declined by 49.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, General Motors Co reported lower earnings of $2.93 a share vs. $4.62 a share in the prior year. This year, the market expects an improvement in earnings ($3.41 vs. $2.93).
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