More Squawk From Jim Cramer: Ford (F), GM, ‘Peak Auto Sales in Sight’

NEW YORK (TheStreet) -- Shares of Ford Motor Co. (F) and General Motors Co. (GM) are down more than 2% in midday trading on Tuesday after the carmakers reported disappointing U.S. December sales.

Ford's December sales increased 8.4% year-over-year, falling short of Bloomberg estimates of an 11% gain, while GM reported a 5.7% rise in U.S. sales last month, missing estimates of 10% growth.

"You can argue that peak auto is in sight," TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning.

The rise in U.S. interest rates "will be an impediment" to auto sales because the "everyday regular guy will not get their savings rate up," but will have to pay higher rates to buy a car, Cramer explained.

TheStreet's Doug Kass continues to back his forecast for weak auto sales this year on his Real Money blog because "liberal financing over the last five years has substantially pulled forward car sales."

Cramer noted that the automakers could continue to find success in China, despite concerns of slow economic growth, because of initiatives such as lower auto taxes.

Cramer asked Ford CEO Mark Fields if he could provide an explanation on why the Chinese economy is deteriorating, despite continued sales growth from U.S. companies in the Asian country.

China is "transitioning to a service and consumption based economy" from a manufacturing economy, which will increase volatility, Fields responded, echoing Cramer's earlier comments.

Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate FORD MOTOR CO as a Buy with a ratings score of B. 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 increase in net income, revenue growth, good cash flow from operations, growth in earnings per share and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 128.6% when compared to the same quarter one year prior, rising from $835.00 million to $1,909.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 9.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $6,455.00 million or 20.22% when compared to the same quarter last year. In addition, FORD MOTOR CO has also modestly surpassed the industry average cash flow growth rate of 12.12%.
  • FORD MOTOR CO reported significant earnings per share improvement 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 MOTOR CO reported lower earnings of $0.78 versus $1.75 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $0.78).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Automobiles industry and the overall market, FORD MOTOR CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • You can view the full analysis from the report here: F

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