Ford Motor vs. Toyota: Assessing Hybrid EV Stocks

The Rise of Hybrid EVs in an EV Market

The landscape of electric vehicles (EVs) is shifting, with consumers showing a growing preference for hybrids over purely electric vehicles. The surge in hybrid sales, including plug-ins, paints a compelling picture. In a recent year, Americans purchased a record 1.2 million EVs, marking a 46% yearly increase, while hybrid sales skyrocketed by 65%. Hybrids, encompassing plug-ins, have now secured a 10% share of new car purchases in the U.S., outpacing the market penetration of pure electric vehicles.

The Regulatory Environment Shaping Hybrid EV Market Growth

The regulatory landscape is tilting in favor of hybrid and plug-in hybrid electric vehicles as the U.S. administration sharpens its focus on reducing carbon emissions from passenger vehicles. The increasing stringency of auto emissions standards is expected to elevate the prospects for manufacturers of these types of vehicles.

Comparing Ford Motor and Toyota in the Hybrid EV Market

The Case for Ford Motor Stock

One heavyweight in the race for hybrid EV market dominance is Ford Motor Company (F), a Michigan-based automobile manufacturer founded in 1903. Ford’s diverse product portfolio spans trucks, commercial vehicles, SUVs, and luxury models under the Lincoln brand. With a market capitalization of $51.89 billion, Ford has seen a 14.5% rise in its stock price over the past 52 weeks, albeit trailing the broader S&P 500 Index, which surged by 30.5% during the same period. However, Ford has struggled over the long term, delivering a 15% decline in the last decade.

Ford made a strategic move by reinstating its dividend payments after the pandemic-induced suspension in 2020. The company raised its quarterly dividend to 15 cents per share, and also issued a special dividend of 18 cents per share. Currently yielding 4.6%, Ford’s annual dividend of $0.60 per share is well-supported by its payout ratio of 61.4%, indicative of sound dividend coverage from adjusted earnings.

From a valuation standpoint, Ford appears attractively priced at 6.85x forward adjusted earnings and 0.29x sales, presenting a substantial discount relative to both industry peers and its own historical averages.

Ford’s Q4 Earnings Performance

In the competitive EV market, Ford faced challenges, with its “Model e” segment incurring an EBIT loss of $4.7 billion, translating to a significant loss of $64,731 per EV sold in 2023. However, Ford saw a surge in hybrid sales, with Q4 figures demonstrating a remarkable 55% growth, amounting to 37,229 vehicles sold.

In its latest earnings report for the fourth quarter, Ford recorded a total loss of $526 million, primarily due to exceptional charges related to pension programs and international operational reorganizations. The company’s profitability was further affected by heightened labor costs resulting from an extended strike by the United Automobile Workers (UAW) union. Despite these challenges, Ford outperformed market expectations, posting adjusted earnings of $0.29 per share and revenue of $43.21 billion, surpassing analysts’ projections.

Ford Motor Company
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The Battle of the Auto Giants: Ford vs. Toyota

By: Alex Freidmen

The Rise of Hybrid Sales: Ford’s Outlook

During the recent conference call, Ford’s CEO, Jim Farley, delivered a bullish forecast on the company’s global hybrid sales. With a 20% increase last year, Ford anticipates a whopping 40% surge in hybrid sales for the current year. This bold projection signals Ford’s strategic shift towards sustainable technology.

However, despite the optimistic outlook, the average analyst recommendation for Ford stock has slipped to a “Hold” rating from a previous “Moderate Buy.” Of the 18 analysts covering the company, opinions are divided, with varying recommendations from “Strong Buy” to “Strong Sell.”

Toyota’s Dominance in the Hybrid Market

Valued at a staggering $341.6 billion, Toyota Motor Corporation stands as a behemoth in the auto industry. With a strong foothold in hybrid vehicles, Toyota commands a significant 40% market share in the U.S. Such market dominance has propelled Toyota’s stock to return an impressive 82.5% over the last year, outperforming the broader market by a significant margin.

Toyota’s consistent dividend payments over the past 37 years underscore its financial stability. Offering an annualized dividend of $4.00 per share with a yield of 1.58%, Toyota attracts investors seeking both growth and consistent returns.

Toyota’s Growth Trajectory Through Hybrid Innovation

Toyota’s pioneering work in hybrid technology since the late 1990s has positioned the company for exponential growth. The recent fiscal Q3 results highlighted a stellar performance with a 23% increase in sales and an impressive 86.5% rise in net income. Hybrid car sales surged by 47% annually, displaying a growing preference for environmentally-friendly vehicles.

In a bold move, Toyota’s chairman predicted a shift towards hybrid cars as a complementary solution to the limitations of all-electric vehicles. This forward-looking approach resonates with the market, as evidenced by Toyota’s projected rise in hybrid car sales to 5 million units by 2025, setting a robust growth trajectory for the company.

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Ford vs. Toyota: A Stock Showdown

As automakers Ford and Toyota compete for market dominance, the battle between traditional and hybrid vehicles intensifies. While Ford has an edge in the electric vehicle segment, Toyota’s heritage of innovation and financial prowess position it as a formidable contender in the hybrid EV space. Coupled with its reliable dividend payments, Toyota emerges as the more attractive investment option between the two giants.