Market participants eager to pick up value stocks at cheap prices flocked to automotive firms. General Motors (GM) bounced by 15.57% last month, compared to the small 6.76% return in Ford (F).
The market does not care about GM’s expensive wage deal with the UAW. Instead, GM stock rose when the company reinstated its fiscal year 2023 earnings guidance. More importantly, it will buy back around one-quarter of its $44.32 billion market capitalization. The $10 billion share repurchase plan, along with a 3 cent per quarter hike in dividend starting in 2024, signals confidence.
GM estimates $1.1 billion in EBIT-adjusted costs from the UAW strike. Since this is primarily from lost production, investors should expect net income in the range of $9.1 billion to $9.7 billion. It will earn up to $7.02.
CEO Mara Barra said that GM has an exceptional portfolio of vehicles that its customers love. It will adjust its 2024 budget to offset the costs related to its new labor agreement.
Ford ticked higher when it issued a full-year adjusted EBIT of $10.0B - $10.5B. The wage costs will add $900 in costs per vehicle by 2028. This is 60-70 basis points of adjusted EBIT margin. Shareholders are worried that Ford will not offset higher costs with improved productivity and lower expenses.
For now, GM is more appealing than F stock.
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