Evaluating Investment Options Between GM and Ford
Many investors find themselves contemplating the promising prospects of General Motors (NASDAQ: GM) and Ford (NASDAQ: F) as they navigate the automotive landscape. After a strong performance in 2025, these traditional automakers surpassed expectations despite the challenges of rising operational costs and a shifting market. Their exceptional results in the previous year, compared to their peers, make them intriguing options to consider.
Both companies showed resilience in the face of fears surrounding the slower growth of electric vehicles (EVs) and economic uncertainties. Their solid financial performances provided significant reasons for optimism among investors.
With GM stock climbing 65% to an impressive high of over $80, and Ford showing a robust increase of more than 40% to nearly $14, the question remains: will this upward trajectory continue?
GM’s Leading EV Sales Performance
While EV sales in the U.S. faced a downturn in Q4 due to the discontinuation of the $7,500 federal tax credit, GM still managed to achieve outstanding sales figures. They recorded an impressive 169,887 EVs sold last year, showcasing a remarkable growth of 48% from the previous year even though quarterly sales dipped.
GM's performance secured its position as the second-highest EV seller in the U.S., following Tesla, with their Chevy Equinox EV taking the lead as the preferred non-Tesla model. Overall, GM’s total vehicle sales increased by 5.5%, totaling 2.8 million vehicles.
On the other hand, Ford, ranking third, reported markedly lower EV sales of 84,113 units, down 14% from previous figures. This decline emphasizes the need for Ford to diversify its EV offerings; currently, they provide only three models compared to GM's wider variety across its brands.
Forecasting GM and Ford’s Financial Future
Based on the latest estimates, GM is expected to have ended fiscal 2025 with earnings just shy of last year's peak, at $10.33 per share. Analysts project an encouraging rebound in FY26, anticipating earnings to rise by 14%, reaching $11.81. Positive adjustments in GM’s earnings forecasts indicate growing investor confidence.
In contrast, Ford’s projected FY25 earnings of $1.08 reflect a steep decline from 2024, largely impacted by operational costs. However, their estimated earnings are expected to recover somewhat in FY26, with forecasts predicting an increase to $1.42 per share.
Ford’s sales are slightly retracted but remain robust overall, with total sales expected to dip modestly in FY26. Both companies are scheduled to report their Q4 2025 results soon, making these upcoming reports crucial to their financial trajectories.
Analyzing Return on Invested Capital (ROIC)
Investors should also consider the return on invested capital (ROIC) as both GM and Ford navigate their transitions toward EV production. The automotive sector is known for capital-intensive operations that require substantial investments, and both companies are experiencing this firsthand.
Currently, GM boasts a higher ROIC of 4.6% compared to Ford's 2.7%. This number reflects the challenges automakers face as they invest heavily in new technologies before witnessing substantial profit returns. Investors are advised to remain vigilant of these metrics as they hint at overall profitability.
Valuation Insights and Dividend Potential
Despite their low ROIC figures, GM and Ford present compelling investment opportunities as both offer dividends and trade at favorable P/E ratios—under 11X forward earnings. GM's valuation is particularly advantageous, with a lower P/E ratio of 7X as compared to Ford’s 10X.
Dividends also highlight Ford's attractiveness, offering a 4.23% yield compared to GM’s 0.72%. However, GM’s dividends have seen a more impressive increase over the past five years post-pandemic, standing at 20.46% growth, which showcases its commitment to returning value to shareholders.
The Bottom Line on Investment Choices
Considering all metrics, GM is gaining traction as an appealing option for investors due to its higher ROIC and strong earnings momentum, pressing it to a Zacks Rank #1 (Strong Buy). Ford currently holds a Zacks Rank #3 (Hold), underscoring that while it’s a viable option, GM may currently be more attractive.
Frequently Asked Questions
What are the current investment ratings for GM and Ford?
GM holds a Zacks Rank #1 (Strong Buy), while Ford is rated as Zacks Rank #3 (Hold).
How did GM perform in EV sales compared to Ford?
GM sold 169,887 EVs last year, significantly outpacing Ford's total of 84,113 EVs.
What are the future earnings projections for both automakers?
GM's earnings are projected to rise to $11.81 per share in FY26, whereas Ford is expected to rebound to $1.42 per share.
How do GM and Ford's ROIC figures compare?
GM has a higher ROIC at 4.6%, while Ford's is at 2.7%.
What dividend yields do GM and Ford offer?
Ford offers a 4.23% dividend yield, while GM offers a lower yield at 0.72% but has shown a higher growth rate in dividends over the past five years.
