GM, Other US Automakers Face Sharp Profit Squeeze From Trump Tariffs, Analysts Warn

Investors interested in Automotive - Domestic stocks are likely familiar with General Motors (GM) and Polaris Inc (PII). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, General Motors has a Zacks Rank of #2 (Buy), while Polaris Inc has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GM is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

GM currently has a forward P/E ratio of 5.36, while PII has a forward P/E of 21.19. We also note that GM has a PEG ratio of 0.42. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PII currently has a PEG ratio of 7.13.

Another notable valuation metric for GM is its P/B ratio of 0.82. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PII has a P/B of 2.83.

Based on these metrics and many more, GM holds a Value grade of A, while PII has a Value grade of C.

GM has seen stronger estimate revision activity and sports more attractive valuation metrics than PII, so it seems like value investors will conclude that GM is the superior option right now.

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Elon Musk, the trailblazer behind Tesla , SpaceX, and other groundbreaking ventures, once reflected on a pivotal moment in history: “When Henry Ford made cheap, reliable cars, people said, ‘Nah, what’s wrong with a horse?’ That was a huge bet he made, and it worked.” The comparison is more than just an observation—it’s a window into Musk’s own philosophy of innovation and risk-taking.

Henry Ford’s Legacy: A Blueprint for Transformation

Henry Ford’s introduction of the Model T in 1908 revolutionized transportation. Before the advent of affordable cars, horses and carriages were the norm, and the idea of replacing them seemed unfathomable to many. Ford’s innovation wasn’t just about creating a new product; it was about making that product accessible to the masses. By streamlining production with the assembly line, he slashed costs, made cars affordable for the average American, and transformed society.

Musk’s admiration for Ford stems from the parallels in their bold, visionary approaches. Both entrepreneurs have faced skepticism and significant risk, yet their willingness to bet on transformative ideas has reshaped industries.

Tesla: The Electric Vehicle Revolution

Much like Ford challenged the dominance of horses, Musk has taken on the entrenched automotive industry. When Tesla began producing electric vehicles (EVs), the idea of widespread adoption seemed far-fetched. Skeptics doubted whether EVs could compete with traditional gas-powered cars in terms of performance, range, and cost.

Tesla’s Model S, introduced in 2012, shattered those doubts, proving that EVs could be both high-performance and desirable. The subsequent launch of the more affordable Model 3 in 2017 mirrored Ford’s vision of making cars accessible to the average consumer. Today, Tesla has become synonymous with the EV revolution, leading the charge toward a more sustainable future.

Musk’s approach to EVs, however, didn’t stop at the vehicles themselves. Like Ford’s assembly line, Tesla’s Gigafactories are designed to make EV production scalable and cost-efficient, helping the company meet growing demand while driving down costs.

SpaceX: Redefining Space Exploration

Musk’s nod to Ford also reflects his work at SpaceX, where he has redefined the economics of space travel. When Musk proposed the idea of reusable rockets, many in the aerospace industry dismissed it as impractical. However, much like Ford bet on cars replacing horses, Musk bet on reusability as the key to making space travel more affordable and sustainable.

SpaceX’s Falcon 9 rockets, which can return to Earth and be reused for subsequent launches, have proven Musk’s gamble right. The company’s achievements—ranging from resupplying the International Space Station to planning missions to Mars—are laying the groundwork for a future where space exploration is no longer limited to governments and billion-dollar budgets.

The Common Thread: Betting on the Future

Musk’s comparison to Ford underscores the courage required to challenge the status quo. Both men faced critics who couldn’t envision the change they proposed. Ford had to convince a world accustomed to horses to embrace cars. Musk has had to persuade a fossil fuel-dependent society to adopt EVs and a skeptical aerospace community to embrace reusability.

Both Ford and Musk succeeded not just because of their innovations, but because they understood the transformative potential of accessibility. Ford made cars affordable to every household, while Musk is working to make EVs, renewable energy, and even space travel attainable for broader audiences.

Inspiring the Next Wave of Innovators

The parallels between Musk and Ford also serve as an inspiration to future entrepreneurs. The lesson is clear: transformative innovation requires bold bets, a willingness to take risks, and a belief in the long-term vision. Whether it’s developing technologies that redefine transportation, energy, or space exploration, the greatest innovations often start as ideas that seem improbable or even impossible.

From Horses to Rockets

Elon Musk’s reflection on Henry Ford is more than just a historical anecdote—it’s a rallying cry for those who dream of reshaping the world. By betting big on electric vehicles, sustainable energy, and interplanetary exploration, Musk is carrying forward Ford’s legacy of bold, visionary entrepreneurship. Both men remind us that the greatest advancements often begin with the simplest question: “What’s next?”

On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

• Tesla is Disrupting The Automobile like Cars Disrupted Horses, Says Elon Musk, "When Henry Ford Made Cheap, Reliable Cars, People Said, ‘Nah, What’s Wrong With a Horse?"
• Elon Musk Says To Find a Reason To Look Forward to Tomorrow, "There Have to Be Reasons That You Get Up in the Morning and You Want to Live, What Do You Love About the Future?"
• Elon Musk: "If Things are Not Failing, You are Not Innovating Enough"
• Elon Musk Says To Do Stuff Even If You're Going to Fail, "When Something is Important Enough, You Do It Even If The Odds Are Not in Your Favor"

Advance Auto Parts’ AAP top line is impacted by planned store closures and weakness in the DIY segment. The company also requires higher capital to support business growth.

Let’s see what makes this Zacks Rank #5 (Strong Sell) stock a risky bet.

Reduced Store Footprint, Weakness in DIY Ail Advance Auto

AAP’s sales are impacted by planned store closures, which reduced net sales by about $700 million in the last 12 months. Pro-forma revenues for 2024 are expected to range from $8.2 billion to $8.4 billion, with a net sales reduction of $600-$800 million. The higher end assumes some sales will transfer to remaining stores, while the lower end accounts for challenges from realigning sales efforts due to the reduced store footprint.

The company's DIY segment is facing pressure due to financial strain on consumers, leading to fewer discretionary purchases. While the automotive industry remains resilient because essential maintenance is unavoidable, the short-term challenges are reflected in weaker DIY sales trends.

AAP is increasing its capital expenditure to support business growth, expand new stores, and enhance its supply chain and merchandising projects for better inventory availability. Investments will also address store and technology updates, focusing on essential maintenance like roofing, HVAC and system upgrades. In 2025, the company anticipates spending at least $300 million in capital expenditure. Higher expenditure may limit near-term cash flow.

Price competition remains a concern for Advance Auto, as it competes with national and regional automotive retailers, such as AutoZone, O’Reilly Automotive, Pep Boys and CSK Auto Corporation. It is also facing incursion from online competition and increasing parts quality/complexity. Discouragingly, AAP expects continued pressure in its DIY business segment.

Stocks to Consider

Some better-ranked stocks in the auto space are Dorman Products, Inc. DORM, Tesla, Inc. TSLA and BYD Company Limited BYDDY, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for DORM’s 2024 sales and earnings suggests year-over-year growth of 3.66% and 51.98%, respectively. EPS estimates for 2024 and 2025 have improved by 75 cents and 88 cents, respectively, in the past 30 days.

The Zacks Consensus Estimate for TSLA’s 2024 sales suggests year-over-year growth of 2.97%. EPS estimates for 2024 and 2025 have improved 2 cents each in the past 30 days.

The Zacks Consensus Estimate for BYDDY’s 2024 sales and earnings suggests year-over-year growth of 25.07% and 31.51%, respectively. EPS estimates for 2024 and 2025 have improved by 35 cents and 39 cents, respectively, in the past 30 days.

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For those looking to find strong Auto-Tires-Trucks stocks, it is prudent to search for companies in the group that are outperforming their peers. Byd Co., Ltd. (BYDDY) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-to-date performance to find out.

Byd Co., Ltd. is one of 102 companies in the Auto-Tires-Trucks group. The Auto-Tires-Trucks group currently sits at #11 within the Zacks Sector Rank. The Zacks Sector Rank includes 16 different groups and is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors.

The Zacks Rank is a proven system that emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks that are displaying the right characteristics to beat the market over the next one to three months. Byd Co., Ltd. is currently sporting a Zacks Rank of #1 (Strong Buy).

Within the past quarter, the Zacks Consensus Estimate for BYDDY's full-year earnings has moved 12.6% higher. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.

Based on the latest available data, BYDDY has gained about 20.6% so far this year. Meanwhile, the Auto-Tires-Trucks sector has returned an average of 6.6% on a year-to-date basis. As we can see, Byd Co., Ltd. is performing better than its sector in the calendar year.

Another Auto-Tires-Trucks stock, which has outperformed the sector so far this year, is General Motors (GM). The stock has returned 54.5% year-to-date.

For General Motors, the consensus EPS estimate for the current year has increased 4% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

To break things down more, Byd Co., Ltd. belongs to the Automotive - Foreign industry, a group that includes 24 individual companies and currently sits at #66 in the Zacks Industry Rank. On average, this group has lost an average of 20.1% so far this year, meaning that BYDDY is performing better in terms of year-to-date returns.

In contrast, General Motors falls under the Automotive - Domestic industry. Currently, this industry has 17 stocks and is ranked #191. Since the beginning of the year, the industry has moved +19.1%.

Investors with an interest in Auto-Tires-Trucks stocks should continue to track Byd Co., Ltd. and General Motors. These stocks will be looking to continue their solid performance.

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