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Why Ford and GM Shares Soared Today

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The combination of markets being closed, and Ford's (NYSE: F  ) stellar earnings, must have created some pent up demand for shares. Shareholders and prospective investors watched shares climb north of 8% today. You also had GM (NYSE: GM  ) reporting promising results today, as well, sending shares up 9%. These two powers combined for some serious optimism in U.S. auto shares today. What was the story behind the numbers, though?

Ford's Surprise
The company met expectations on revenues, but exceeded analyst estimates for earnings by 32%. The main driver of earnings this quarter was the North American segment, where the company highlighted strong pricing power on their new and improved vehicles. The company also highlighted strong demand for the redesigned Fusion, and it looks like it will certainly follow in the successful footsteps of the previous model.

The international segment was mixed, with continuing losses in Europe, and a small profit in Asia. Ford has made big investments in Asia recently, and shareholders should watch for the segment to increase in profitability over the long term. All and all, Ford is staying "Ford Tough," and investors appear to be pleased with the results. 

GM's surprise 
The story at GM today was much similar to Ford's. The company exceeded analyst estimates for earning per share by 36%, and met expectations for revenues. GM also noted strength in its pricing power, but noted its product mix was still dragging down profits overall. It was noted that the release of new, higher margin, models will help the product mix, and increase profitability.

The company continued to see strong growth in China, and swung to a profit in South America, compared to last year. What was really driving shares was news out of the European unit. GM has overhauled its leadership team and formed an alliance with French automaker PSA Peugeot Citroen (NASDAQOTH: PEUGY.PK). These developments create some optimism over the cash bleeding Opel unit in Europe. 

What this means to you
Current investors should be pleased with these results, and prospective investors should take note, as well. Both companies are priced at a discount to the overall market, and are turnaround plays in the works. One thing GM investors should keep an eye on is the government stake in the company. As the shares continue to appreciate in price, so does the probability that the government will exit it's large position. 

Ford has been performing incredibly well as a company over the past few years, and GM is starting to follow suit. But Ford's and GM's stock seem stuck in neutral over the past year. Does this create an incredible buying opportunity, or are there hidden risks with the stocks investors need to know about? To answer that, one of our top equity analysts has compiled two premium research reports with in-depth analysis: Is Ford a Buy Right Now and GM: A Turnaround Story Gaining Traction. Simply click here to get instant access to this Ford premium report, or click here for the premium report on GM.

Blake Bos 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.

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Related Tickers

10/27/2016 10:57 AM
F $11.66 Down -0.22 -1.85%
Ford CAPS Rating: ****
GM $31.28 Down -0.30 -0.95%
General Motors CAPS Rating: ***