Earnings Could Put GM, Ford Shares on Same Track -- Update
July 30 2019 - 05:03PM
Dow Jones News
By Gunjan Banerji
Shares of Ford Motor Co. and General Motors Co. have diverged
this month, with Ford's stock price slipping and General Motors'
rising.
Their fates could come together, however, when GM reports
earnings this week, analysts said.
Ford has fallen about 6.7% in July, while GM is up 4.9%. They
have both notched gains in 2019, advancing more than 20%
apiece.
Ford last week reported flat second-quarter operating income and
a disappointing earnings outlook.
Overall U.S. vehicle sales fell in the latest quarter and,
analysts said, General Motors isn't immune to these types of
headwinds.
"In light of [Ford's] drop after its number last week, I don't
think GM is so different from [Ford] that its earnings would be
much better," said Tom Preston, quantitative strategist at options
education platform Tastytrade.
The price/earnings ratio, a traditional valuation measure, for
the next 12 months has ticked up for Ford and GM since the end of
2018.
Options traders appear to be bracing for a big move in GM stock.
They are projecting a 3.9% move after it reports its earnings
before the market opens on Aug. 1, above the average 3.5% move
recorded over the past eight earnings releases, according to data
provider Trade Alert.
The forecast is based on a trade called a straddle, which
doesn't measure whether the stock will go up or down, only the size
of the swing in either direction. A straddle entails buying both
bearish and bullish options that allow investors to buy or sell
stock as a specific price.
"The risk in GM earnings...are certainly to the downside," said
Shawn Cruz, manager of trader strategy at TD Ameritrade.
Write to Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires
July 30, 2019 16:48 ET (20:48 GMT)
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