Ford Motor Company (F), General Motors Company (GM), or Toyota Motor Corp (ADR) (TM): Which Is Best Going Into 2014?

After an outstanding year in 2013, shares of Ford Motor Company (NYSE:F) slumped lower by nearly 8% once the company’s 2014 outlook was presented. Clearly, the company recently reported some disappointing news, so does this mean that General Motors Company (NYSE:GM) or even Toyota Motor Corp (ADR) (NYSE:TM) are better buying opportunities?

Ford Motor Company (NYSE:F)

What did Ford Motor Company (NYSE:F) say?
According to Ford Motor Company (NYSE:F) CFO Bob Shanks, the company’s pre-tax profit in 2014 will be lower than in 2013. The company cites a number of reasons for this lack of improvement, including unanticipated government action in emerging markets, product recalls, and also a pension obligation boost.

With that said, pre-tax profits hit record highs in previous quarters. Therefore, a modest decline shouldn’t weigh too heavily on the stock over the long term, especially since unit growth is still expected in 2014. Thus, the key question is: To what degree will pre-tax profits fall? It’s a question that’s sure to create quite a bit of speculation.

What does this mean for General Motors Company (NYSE:GM)?
If we look at the factors that Ford Motor Company (NYSE:F) is attributing to its gloomy guidance, we may see that some might also affect its peers.

Obviously, product recalls vary by company, but unanticipated government action or a rise in pension obligations could definitely affect the outlook for General Motors Company (NYSE:GM).

The U.S. auto industry is a space that tends to trade in tandem. However, in the last two years Ford Motor Company (NYSE:F) has been an investment favorite, as the company paid down its debt, saw explosive growth, and gave back to shareholders in the form of a $0.10 quarterly dividend.

General Motors Company (NYSE:GM) has performed well as of late, but with GM, there had been the negative stigma surrounding its largest investor, which of course is the government. Hence, while the government owned such a large stake, shares of GM remained cheaper than its peers, and the company still does not pay a dividend.

The Treasury has been selling shares at a rapid rate over the last year, and on Dec. 9 it confirmed that its remaining 31.1 million shares had been sold. Therefore, General Motors Company (NYSE:GM) is no longer government owned, and has approximately $37 billion in liquidity that can be used for dividends and to make other investments.

Which has the most value?
A General Motors Company (NYSE:GM) dividend will be a huge catalyst — the value of the stock might end up making it a better investment opportunity than its peer, Ford.

Currently, GM trades at just 0.4 times its trailing-12-month sales; Ford trades at 0.4 times sales. Also, analysts expect GM to grow 6.5% in 2014, compared to 4.5% for Ford. Hence, GM is cheaper because it’s expected to grow faster. This, combined with the likelihood of a near-term dividend announcement, might mean that GM presents more upside for auto investors..

What about foreign automakers?
Of course, auto manufacturers aren’t limited to just the U.S., as other countries also have large companies in this space. The largest being Toyota, which might lead some to wonder if Toyota Motor Corp (ADR) (NYSE:TM) presents a better opportunity than U.S. manufacturers.

While this is a fair question, GM still looks like the best bet.

Toyota Motor Corp (ADR) (NYSE:TM) is trading at 0.6 times sales, which is more expensive than Ford or GM. Toyota is expected to grow 5% in 2014, slower than GM, and Toyota Motor Corp (ADR) (NYSE:TM) also trades at a higher price-to-future-earnings ratio than either GM or Ford Motor Company (NYSE:F). With that said, either U.S. manufacturer is likely a better opportunity than Toyota.

Will 2014 be a bright year for the auto industry?
Ford is planning to launch 23 models globally in 2014, which is by far the most product launches in a year in its history. Therefore, growth could accelerate and this fact serves as a huge catalyst into 2014.

Aside from a pending dividend announcement, GM’s emerging market growth has been remarkable. Earlier this month, GM announced that it had sold 3 million units in China, a first for the company in that country. This emerging market growth simply adds to the reasons for being bullish about GM into 2014, and is one reason that sales of GM are expected to rise rapidly in the year ahead.

Final thoughts
The auto market has been one of the true bright spots for the U.S. economy and is expected to see continued growth into 2014. While Ford is likely to recover the losses from Wednesday, and Toyota Motor Corp (ADR) (NYSE:TM) will maintain its place as the world’s largest auto company, GM just looks to be the cheaper stock with the most catalysts going forward. Therefore, if GM isn’t on your radar, then you might want to explore the stock thoroughly heading into 2014, as it could begin trading higher.


The article Ford, General Motors, or Toyota: Which Is Best Going Into 2014? originally appeared on

Brian Nichols owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 

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