Those of us living in Michigan have been through a horrendous couple of years, but we can definitely see the light shining -- however slightly -- at the end of the tunnel. Recently, both Ford (F) and General Motors (GM) raised their year-end 2012 forecasts to indicate a rebound in U.S. auto sales to above the 14 million mark. So both companies are likely on the road to recovery … but which is the better buy right now?
In my analysis, I tend to rely heavily on analyst opinion and estimates. I figure, they have been studying the stock for a while and probably have a better handle on the numbers than I do. I do look at current news as well, but I like to lean more on the numbers to provide an objective recommendation.
Ford is currently trading at about $10, significantly off its 52-week high of $14.90, reached last summer. It has a P/E of 7.1 and pays a 1.9% dividend. The current analyst rating is a 2.1 (1.0 = Strong Buy, 5.0 = Sell) with a mean target price of $16.00. There are five Strong Buy recommendations, seven Buys, and six Holds.
The full-year 2012 consensus estimated earnings is $1.49, which is 1% lower than the actual 2011 earnings of $1.51. The estimate for year-end 2013 is $1.73, 16% higher than year-end 2012.
The stock is down% year to date, and down 27% from this time last year. The current estimated annual growth rate for the next five years is 8.73%, compared to an industry average of 14.10% and a sector average of 15.76%.
GM is trading at approximately $22 per share, off its 52-week high of $31.28 reached last July. It has a P/E of 6.7 and pays no dividend. Currently, analysts rate it a 1.9 (six Strong Buys, nine Buys, and four Holds) with a mean target price of $34.13.
GM's full-year consensus earnings estimate is 3.49, 10% lower than actual 2011 earnings. Its estimate for year-end 2013 is $4.60, 32% higher than year-end 2012.
The stock is up 9% since the beginning of 2012, but down 29% from a year ago. Current five-year annual growth is estimated at 13.04% vs. the S&P at 10.41%.
Recent news has been good for both companies, with GM boasting a new investment courtesy of Warren Buffet and Ford earning back its Investment Grade status at Moody's. However, concern still holds regarding the eurozone weakness.
Eventually, however, I go back to the numbers. With Ford's current P/E and year-end 2013 earnings estimate, I see a stock price of $12, or upside of 20%. GM's P/E and earnings estimate leads to a stock price of $29, or 31% upside.
So although both companies make it past my 15%-plus filter, I like GM better at this point. (Never thought I would say that, as I used to work for a GM supplier and hated the company with a passion. However, numbers are numbers.) Buy with a target of $30 by year-end 2013.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
