The Automobile Industry Shows America's Economy Is Recovering
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In this day and age, people are very picky about what car they will choose. Some want an SUV, some want something good on gas mileage, and some just want something to get them from point A to point B. Obviously, I don't have the time or space to write about every car in the industry, but in the next few minutes we will discuss which of the major companies in the automobile industry will give you the best value for your investment dollar.
Toyota (NYSE: TM) has done an incredible job at expanding internationally. It has obviously succeeded at this because we all know the company, a lot of us own their vehicles, and we, in America, are over 5,000 miles away. With this being said, how has the company done recently?
This past quarter their sales were down 1.9%, while their SGA is up 2.7%. However, the SGA isn't elevated from the past. As in quarter 1 of this year, it was actually almost 7% higher than this past quarter. Their net income is down as well, decreasing by nearly 13% in Q3. Toyota's capital expenditures are up an astounding 92% in Q3, rebounding from a low Q2. Interestingly, their TTM (Twelve Trailing Months) of FCF (Free Cash Flow) has stayed about the same over the past few years.
How does the American market compare to Japan's? Ford (NYSE: F) has seen sales decrease by 3.2%, however their SGA is also down 2.4% in the last quarter. Their FCF in the TTM has actually increased 57% along with their capital expenditures which increased 58%. Ford actually did very well in Q3 having a lower SGA and sales, but still managed to increase their net income by 56.8%, their FCF, and capital expenditures by significant amounts. This says a lot about the management of Ford.
General Motors (NYSE: GM) faired similarly to Ford, which is good for them. Maybe the American automobile industry is out performing the foreign market. Their sales didn't change in Q3 (it was down just .1%). SGA's were down 5%, but their net income also remained the same (decreasing by .1%). So, sales and net income leveled off, and their expenses went down. This should increase their net worth.
As expected, their net worth increased by quite a bit at 8.95%, probably because of their capital expenditures increasing by 47%. Yes, General Motors capital expenditures increased less than both Toyota or Ford, but it still isn't a number to be ashamed of. General Motors FCF also increased handsomely over the TTM - 68%. Remarkably, after being bailed out just a few short years ago, they actually increased or stayed the same in every major area (except SGA's, which is good.)
So, it appears that the American economy, as believed by a lot of people, actually is starting to rebound, and is also doing better than the foreign economy. This graph shows their growth in the past three months, and it becomes obvious that Ford and GM have more than tripled the return in that time period.
However, when looking at this next chart it becomes obvious that Toyota has consistently put more money toward their capital expenditures, and it has paid off. Just this past quarter they have outdone Ford by 34%, only 13% less than General Motors total quarterly contribution. The graph below is showing how that has paid off, and why Toyota has done best in a longer period of time.
Looking at these stocks, and doing this research has led me to believe that Ford is actually an investor's best bet in the short to mid term. Their management has done a very good job with what they have. However, long term, Toyota has won, as they continue to dump money into capital expenditures, still do well, and continue to grow. Looking at these numbers and charts, maybe America actually is starting to re-build its economy.
tlwofford has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!