Toyota Vs. Ford — Which Motor Stock Is The Better Buy?

Auto rivals Toyota Motor Corp TM and Ford Motor Co F are both reporting earnings on Feb. 6, and investors are keen to understand their contrasting market positions and technological focuses.

While Tokyo-based Toyota is reporting before market hours on Feb. 6, Dearborn, Michigan-based Ford will be reporting after the market close.

Wall Street is expecting Toyota to report $75.94 billion in third quarter (Q3) revenues. Ford is expected to report 13 cents in Q4 EPS and $39.53 billion in revenues. Toyota and Ford have distinctive characteristics across various aspects of the automotive industry.

Toyota, a Japanese multinational, is known for its dedication to producing high-quality, reliable, and fuel-efficient vehicles. On the other hand, Ford, a longstanding American automaker, has a historical dominance in the U.S. market, particularly with trucks and SUVs.

Business & Product Portfolio

Toyota holds a significant global market share, with a robust presence in Asia, North America, Europe, and other regions. It is recognized for pioneering hybrid technology and achieving a diverse market presence. Ford, while having a strong historical presence in the U.S., has a more concentrated international footprint compared to Toyota.

In terms of product line, Toyota’s stable encompasses a diverse range, including sedans, SUVs, trucks, and hybrids emphasizing fuel efficiency, reliability, and continuous innovation. Ford, on the other hand, is notably recognized for its trucks (e.g., Ford F-Series) and SUVs (e.g., Ford Explorer), and has been making strides in electric and hybrid vehicles.

Toyota has been a leader in hybrid technology, driving mainstream adoption. It invests significantly in advanced safety features, autonomous driving technology, and sustainable practices. Ford, meanwhile, is focused on innovation in electric and autonomous vehicles.

Global Challenges

In January, Ford reported a robust start to the year in the U.S., outpacing Toyota in sales despite challenges in the electric vehicle segment.

Ford’s US sales increased by 4.3% to 152,617 vehicles, with a market share of 13.7%.

The success was attributed to record sales of the Maverick compact pickup and strong performance in trucks and vans, surpassing its closest rival, General Motors Co GM.

Hybrid sales for Ford surged by 42.7%, but EV sales faced a setback, declining by 10.9% YoY to 4,674 units.

The challenges in EV sales are attributed to factors such as the expiration of federal EV tax credits for the Mustang Mach-E, weather concerns, and higher interest rates. Ford is adapting its EV strategy, adjusting investments and production plans, including for models like the Lightning EV pickup.

Both companies face challenges in adapting to global trends, including the shift towards electric vehicles and the growing emphasis on sustainability. Toyota must navigate changing consumer preferences and market dynamics, while Ford is working to strike a balance between traditional models and the imperative for sustainable transportation.

Also Read: What’s Going On With Ford Stock?

Valuation

Over the past year, Toyota stock is up over 40% while Ford is down over 10%. This is reflected in their valuations too:

Data compiled from Yahoo Finance

Consequently, Ford stock is trading at a lower multiple than Toyota stock. Forward P/E for Ford stock at 6.78 appears to compare very favorably relative to peer Toyota at 17.7 forward P/E.

Analyst ratings confirm this view:

Consensus analyst ratings rate Ford stock a hold currently, with the stock offering just over 5% upside. The price of Toyota stock, on the other hand, has moved ahead of its intrinsic valuation, which now lows 2.78% below it, per analyst consensus.

As the latest earnings results surface, and analysts begin to re-assess their stance on these auto stocks based on latest financials and outlook, investors may be better guided on which stock is the better buy.

Read Next: Toyota Hits Global Production High With 11.52M Vehicles In 2023, Yet Daihatsu And Hino Motors Raise Red Flags

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