Editors’ Note: in the below video pension and other postretirement benefits should be used instead pension contributions terminology. Pension contributions are included in cost of sales and selling and general administrative expenses and classified as net periodic benefit cost, and they are not the same as the pension items included in other comprehensive income. Simplified; as a company reports pension and other postretirement benefit losses, those are amortized over time and included in expenses. For example; Ford expects to recognize $1.6 billion of pension and postretirement benefits in 2013 as net expense. Fool Analyst Blake Bos still believes investors should pay attention to pension and postretirement benefit losses in comprehensive income given they will negatively affect company earnings over the long term as they are amortized to net benefit cost.
In the following video, Motley Fool industrials analyst Blake Bos discusses Ford's (NYSE:F) and GM's (NYSE:GM) under-the-radar pension issues. He tells investors where to look on the balance sheets to find pension contributions, and what Ford's and GM's PEs look like once you factor this number in. Finally, he tells us which of the two companies has a bigger pension contribution burden problem, and which of the two he likes better as an investment right now.
Blake Bos has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 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.