Another huge GM buyback makes it plain to see that Ford must follow suit
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General Motors approved yet another stock buyback — adding to our frustration that portfolio name Ford has yet to embark on a repurchase program of its own. GM on Tuesday announced a new $6 billion buyback — weeks before its November $10 billion repurchase authorization is set to be completed. “I’m very upset with Ford,” Jim Cramer said during the Morning Meeting for Club members. “Just buy back the damn stock.” It’s one of the cheapest in the market, he pointed out. “It’s embarrassing.” Ford shares trade at 6.4 times forward earnings. GM is even cheaper — at 5.1 times. By comparison, the S & P 500 trades at nearly 21 times. “GM is once again proving that it knows how to move a stock,” he said earlier on CNBC’s “Squawk on the Street,” shortly after the news. CEO Mary Barra “won’t stop” until it’s dramatically higher, he added. GM has surged 65% since its closing price on Nov. 28, the day before last year’s buyback announcement. Over that same stretch, Ford shares rose only 17.5% — roughly matching the market. F GM 1Y mountain Ford vs. GM 1 year In response to an inquiry about GM’s buyback, Ford told CNBC it remains committed to returning 40% to 50% of adjusted free cash flow to shareholders as it has done over the past couple of years. At a Deutsche Bank auto conference Tuesday, Ford CFO John Lawler said that if the company doesn’t see “opportunities for accretive growth and investment,” it will look to return more cash to shareholders. He alluded to management’s focus on disciplined capital allocation. Ford has been concentrating capital returns to shareholders on dividends over buybacks — evidenced by its 4.9% annual yield compared to GM’s 1% dividend yield. In 2023, Ford spent $5.33 billion on dividends and repurchases , with only about 6.3% on buybacks. GM spent $11.7 billion on dividends and repurchases last year, with just 5% on dividends. Following Tuesday’s repurchase announcement, GM trimmed its 2024 forecast for all-electric vehicle sales and production — reflecting the industrywide slowdown in EVs. Ford has dealt with softening EV demand by leaning away from its money-losing all-electric vehicles and putting more resources behind its high-margin hybrids. While encouraged by Ford’s successful pivot, we believe a sizeable stock buyback would be a catalyst for Ford shares as it has been for GM. (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A Ford Mustang on display at the New York International Auto Show on March 28, 2024.
Danielle DeVries | CNBC
General Motors approved yet another stock buyback — adding to our frustration that portfolio name Ford has yet to embark on a repurchase program of its own.
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