General Motors Company (NYSE:GM) is the nation’s largest automaker and number two worldwide behind Toyota Motor Corporation (ADR) (NYSE:TM). General Motors Company (NYSE:GM)‘s first quarter was a mixed bag, though on the whole, it was better than what was expected. Overall first quarter earnings came to $865 million, or $0.58 per share, about 12% below the year-ago quarter on lowered demand and increased vehicle discounts. Absent one-time items, General Motors Company (NYSE:GM)‘s earnings would have come to $0.67 per share, swamping estimates of $0.54 per share. On the relatively good news, the stock reached levels not seen for about 22 months, and came close to the post-bankruptcy offering price of $33 per share. The government is still the largest stockholder in General Motors Company (NYSE:GM), with over 240 million shares, meaning every point up or down in General Motors Company (NYSE:GM)‘s stock is worth nearly a quarter billion dollars for taxpayers.
North America, in fact, continued to provide the vast bulk of GM’s profits, with operating earnings of $1.41 billion. But, what has really caused some optimism in GM’s future is that the company’s European unit narrowed its loss to $175 million from the $294 million it posted a year ago. GM’s stated goal is for the unit, long a huge money loser, to come back to break-even status by 2015. This quarter went a long way to lending support to that.
GM has been relatively innovative about revenue streams in recent years. Its OnStar service is used by some six million customers. It recently inked a deal to provide AT&T Inc. (NYSE:T) wireless service in its vehicles to enrich the OnStar experience.
The health of the world retail economy has a great impact on all auto companies. GM has a five year PEG of 0.51, below average even for the notoriously cyclical auto business. But, GM has wrung much of the excess out of its business through the bankruptcy, and is not as cyclical as it historically has been.
Ford Motor Company (NYSE:F)
Ford Motor Company (NYSE:F) is America’s second largest automaker, and a much beloved corporate citizen, as it did not take any government help in the recent economic downturn. It has been selling well-rated and received products, and paying down debt in recent years, and the results have been excellent.
In the first quarter of this year, Ford Motor Company (NYSE:F) posted earnings of $1.61 billion, or $0.40 per share. In the same quarter of 2012, earnings were $1.4 billion, or $0.35 per share. Analysts were looking for $0.37 per share. No matter how you look at it, the quarter, Ford Motor Company (NYSE:F)’s fifteenth consecutive with a profit, was a success.
Just like GM, Ford Motor Company (NYSE:F)’s quarter was carried by its North American operations, where pretax profits of $2.44 billion were a record since at least 2000, when Ford Motor Company (NYSE:F) first started breaking out its profits on a geographic basis. Just like for GM, Europe has been an albatross strung around Ford Motor Company (NYSE:F)’s proverbial neck the past few years. In the first quarter, Ford lost $462 million in Europe. Last fall, Ford developed a transformative plan for Europe, but with the European auto market continuing to contract, no plan will prevent Ford from losing roughly $2 billion in Europe this year.
The company also offers a solid 2.9% dividend yield. But, it does not offer the sort of undervalued play that GM does. Ford is hitting on all cylinders but Europe, and there is limited long-term upside from current levels. I am not suggesting selling any current holdings, but Ford is not a compelling purchase right now.
Harley-Davidson, Inc. (NYSE:HOG)
From the agricultural heartland comes Harley-Davidson, Inc. (NYSE:HOG), as much of an iconic success story as any company in America. Many scarcely remember the company’s brush with financial death a number of years back. But, today’s Harley-Davidson, Inc. (NYSE:HOG) is in fine shape, with first quarter earnings of $224 million, or $0.99 per share, a roughly 33% increase from 2012’s first quarter of $172 million, or $0.74 per share. This was accomplished, despite a drop in sales that the company attributed to rough late winter weather, to 54.2 thousand units from 59.7 thousand in the first quarter of 2012. But, the company actually shipped 75.2 thousand units in the quarter, up 17% from a year ago, and the reason for a sales volume increase during the quarter was attributed to the company plowing ahead and out-competing its rivals.
Analysts look for the momentum in profits to continue, with full year 2013 profits up about 20% over 2012 to $3.35 per share. But, despite this growth, Harley-Davidson, Inc. (NYSE:HOG) is not undervalued with a price to earnings ratio of 18. I look for Harley-Davidson, Inc. (NYSE:HOG) to be a middle-of-the-road performer for the next one to three years, and I believe you can do better.
The Goodyear Tire & Rubber Company (NASDAQ:GT)
Another automotive company I rather like is The Goodyear Tire & Rubber Company (NASDAQ:GT). This company, which dates to 1898, is a leading supplier of original equipment and replacement tires around the world, and operates some 1,200 retail auto service outlets. In the first quarter, The Goodyear Tire & Rubber Company (NASDAQ:GT) posted profits of $26 million, or $0.10 per share, reversing a loss of $11 million in the first quarter of 2012. Omitting the numerous one-time items it recorded, earnings in the first quarter came to $0.45 per share, versus analysts’ expectations of $0.30 per share. As individuals tend to keep their cars and trucks longer and longer, a company like The Goodyear Tire & Rubber Company (NASDAQ:GT) stands to benefit, and analysts see long-term growth averaging 40% over the next five years, driving The Goodyear Tire & Rubber Company (NASDAQ:GT)’s PEG to a miniscule 0.14, among the lowest I have ever seen. On that basis along, The Goodyear Tire & Rubber Company (NASDAQ:GT) merits closer investigation as an investment opportunity.
Summary
General Motors, Ford, Harley-Davidson, Inc. (NYSE:HOG), and The Goodyear Tire & Rubber Company (NASDAQ:GT) are all making strides to stand apart from competitors. Each company is doing a marvelous job to remain competitive in today’s bleak economy. I think GM’s earnings of about $3.50 per share this year are impressive. I see GM as a potential “buy and hold” situation. Last year, Ford’s earnings were $1.41 per share, which increased to $1.50 this year. Ford’s current price is quite compelling for interested buyers. Harley-Davidson, Inc. (NYSE:HOG) seems like a mediocre company, which is completely unacceptable. I hope the company improves over the next few years. I think investing in Goodyear is a great idea, considering the longevity of the product and its proposed growth over the next few years. I’m interested to see how these automakers expand in the future.
The article Are These 4 Iconic Brands Riding On Shaky Ground? originally appeared on Fool.com and is written by Bill Edson.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
