Ford (F) and General Motors (GM) have had a pretty ugly year. Ford stock is down 6% since Jan. 1 vs. about 5% gains for the S&P 500 in the same period, while GM stock is off nearly 20%.
And if recent auto sales data is any indication, it could get even worse for these automakers in the months ahead.
According to the automotive site WardsAuto, September light vehicle sales were at a seasonally adjusted rate of 16.34 million cars. While the figure is indeed up from last year, it’s down 6% from August’s 17.45 million in light vehicle sales.
Click to Enlarge For more context, check out this chart from Calculated Risk about the long-term trend.
This auto sales data couldn’t come at a worse time for Ford stock. The automaker just lowered guidance and announced that recent recalls could hurt performance going forward.
Ford stock dropped by double digits in one session as a result.
And, of course, we all remember the weight of GM recalls earlier this year that involved 26 million vehicles (and could move even higher).
What’s Next for GM and Ford Stock?
Many investors in GM or Ford stock had been lulled into a false sense of security by the performance of these automakers during the past few years. From September 2012 to September 2014, Ford stock soared 88% on strong earnings and revenue growth — while GM stock was up 63%. By contrast, the S&P 500 was only up about 43% in the same period.
But much of those gains have been given back this year, as the snap-back from the Great Recession lows (and in the case of GM, bankruptcy) has lost momentum and the automakers have started to plateau.
While I don’t expect GM or Ford to crash much further, it’s reasonable to expect serious challenges in 2015 as both cars struggle with the weight of recalls and a slowing vehicle market at home in the U.S.
There are some bright spots, such as GM’s return to profitability in Europe or Ford’s continued success in China.
But remember, the biggest rebound from the Great Recession is now behind us — and a huge driver of Ford and GM profitability in 2013 was from revamped pickup lines that sparked big sales and margins for both automakers.
Given the recent ugly headlines and underperformance for both stocks, I’d consider looking elsewhere.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
