GM and Ford are both reporting earnings this week.
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There are a lot of headwinds facing the global auto industry in 2023. That makes fourth-quarter-earnings reports from
Ford Motor
and
General Motors
particularly important. What both companies say about the coming year will help investors untangle what to do with car stocks, which have had strong start to the year after a miserable 2022.
GM (ticker: GM) goes first, reporting fourth-quarter numbers Tuesday morning. Wall Street is looking for earnings per share of $1.69, operating profit of $3.2 billion, and sales of $40 billion.
A year ago, GM reported earnings per share of $1.35, operating profit of $2.8 billion, and sales of $33.6 billion.
GM expects full-year operating profit guidance to fall between $13 billion and $15 billion. That implies fourth-quarter operating profit of $2.3 billion to $4.3 billion. It’s a wide range, but GM guidance hasn’t budged all year. It started out with that $2 billion gap.
More important than fourth-quarter numbers will be 2023 guidance for operating profit. There are a lot of moving parts to consider. Interest rates are up, making car payments more expensive. Car prices are coming down, pressuring auto maker profitability. What’s more, supplier prices should be rising in 2023 as the supply-base looks to offset some of the inflation it experienced in 2022.
Wall Street expects GM to earn operating profit of $10.2 billion in 2023, roughly $4 billion below the yearly profits generated in 2021 and 2022.
Ford (F) reports fourth-quarter numbers Thursday afternoon. Wall Street is looking for earnings per share of 62 cents, operating profit of $3.5 billion, and sales of $41.4 billion.
A year ago, Ford reported earnings of 26 cents a share, $2 billion in operating profit, and sales of $37.7 billion.
Ford’s full-year guidance for operating profit in 2022 is $11.5 billion, implying fourth-quarter profit of about $3.5 billion.
For 2023, analysts project $10 billion in operating profit. That’s similar to profit generated in 2021 and 2022. That’s different than GM expectations, but Ford has been on a profit-improvement plan for a few years, designed to boost margins.
Ford’s 2022 operating-profit margin in 2022 should be roughly 7%, while GM’s should be about 9%.
GM hosts its earnings conference call at 8:30 a.m. eastern time, and Ford’s call comes on Thursday afternoon at 5 p.m. eastern time. Investors will want a strong finish to 2022 and both companies to demonstrate they can handle the headwinds of 2023.
Coming into the week. GM stock is up about 13% year to date, while Ford stock is up about 14%. Both have bounced back after dropping in 2022. Ford and GM shares remain in the red for the latest 12 months, however, down about 32% and 24%, respectively.
Ford stock trades for about 8 times estimated 2023 earnings. GM stock trades for about 7 times. The
S&P 500
trades for about 16 times estimated 2023 earnings. Automotive stocks don’t typically get big earnings multiples because company sales and earnings have grown substantially for years.
Write to Al Root at allen.root@dowjones.com
Credit: marketwatch.com