Ford Motor has had quite a year and investors have rewarded the company with a market capitalization greater than its chief rival, General Motors .
Ford (ticker: F) closed Tuesday with a market capitalization of $82.962 billion, according to FactSet. GM closed with a market capitalization of $82.916 billion. It is the first time Ford’s market capitalization has exceeded GM’s since 2016, according to Dow Jones Market Data.
With a difference this small, exact share counts matter. And share counts are constantly changing based on management stock options exercises and other factors. Still, accounting for all that, Ford has nipped GM.
Understanding how it happened is easy. Ford stock has risen about 136% year to date. GM shares have gained about 37% so far in 2021. Both returns exceed the 28% and 20% comparable, respective gains of the S&P 500 and Dow Jones Industrial Average. GM stock has done fine, but Ford stock has, simply, lapped its peer.
The why is harder to divine. Ford has been playing catch-up and is essentially in a turnaround being led by new CEO Jim Farley. Coming into 2020, Ford shares had lost about 30% of their value over the preceding three years. GM stock had gained about 2% over the same span.
That doesn’t explain everything though. Looking over the past four years, with 2021 added in, Ford stock has risen about 66% overall. GM shares are up about 39%. Ford has pulled ahead.
The company seems to be getting more credit for its vehicle electrification plans. Ford has made a splash this year launching its all-electric Mustang Mach E, developing its all-electric F-150, and announcing plans to spend billions on new capacity for batteries and electric-vehicle assembly capacity.
GM has, however, done exactly the same thing, announcing billions in spending on batteries, battery materials, and EV assembly capacity. GM is also now selling the all-electric Hummer truck and is planning to unveil an all-electric Chevy Silverado in coming weeks. (Don’t forget, GM sells more EVs than Ford worldwide, including Chinese joint ventures).
The strategies feel the same, but the market is a little uneasy about GM. A couple of factors could be at work. The Chevy Bolt EV was recalled because of battery defects. That defect was traced back to a supplier. There have also been some problems at GM’s autonomous driving company Cruise recently. CEO Dan Ammann departed abruptly, likely because of differences between Ammann and GM CEO Mary Barra over the strategic direction Cruise should take.
The market might be correct in saying Ford had the better year, but underperformance can, in the right conditions, be an opportunity. If GM can get the Bolt and other EVs shipping, successfully launch the Silverado, and make progress on its own autonomous driving features, then the stock should do just fine.
Ford stock is trading for about 10.4 times estimated 2022 earnings. GM stock is trading for about 8.2 times that number. If GM was to trade for 10.4 times earnings it would be a $72 stock and its total return going back to the end of 2017 would be about 75%, which is very close to Ford’s total return.
Write to Al Root at allen.root@dowjones.com
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December 29, 2021 at 10:25PM
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Ford Is More Valuable Than General Motors for the First Time Since 2016 - Barron's
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