Shares of automakers, including General Motors (NYSE:GM) and Ford Motor Company (NYSE:F), fell 5.78% and 4.48%, respectively, on August 10. The falling share prices of these automakers indicate growing concerns over labor costs.
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A Bloomberg report highlighted that the demands made by the United Auto Workers union could drive up labor costs for these car manufacturers and weigh on their bottom lines. Per the report, United Auto Workers is pushing for a substantial 46% wage increase as well as various other alterations such as shorter work weeks and better retirement benefits. These alterations could add billions in expenses for automakers.
As car manufacturers negotiate a new labor contract with the United Auto Workers, hurdles remain, adding uncertainty over their future cost and earnings outlook. With this backdrop, let’s look at what Street has planned for these car companies.
Is GM a Good Stock to Buy Today?
General Motors plans to offer higher wages to unionized workers. However, it warned that the United Auto Workers’ demand for significant pay hikes would hurt its business. During the Q2 conference call, the company increased its 2023 adjusted EBIT outlook to $14 billion from $12 billion. Moreover, it projects its adjusted earnings to be in the range of $7.15 to $8.15 per share, up from its previous guidance of $6.35 to $7.35.
However, the company provided an upbeat outlook ahead of its negotiations with the United Auto Workers. This adds uncertainty to its guidance. Further, how analysts react to these developments and update their estimates remains to be seen.
Currently, General Motors stock has seven Buy, six Hold, and two Sell recommendations for a Moderate Buy consensus rating. Analysts’ 12-month average price target of $50.27 implies 47.16% upside potential.
What is Ford’s Price Target?
Analysts’ 12-month average price target of $15.18 implies an upside potential of 24.84% in Ford stock from current levels.
Like GM, Ford also raised its full-year EBIT guidance to $11 billion and $12 billion from $9 to $11 billion. Further, it expects adjusted free cash flow to come in between $6.5 billion and $7 billion, up from its previous guidance of $6 billion.
Ford’s diversified portfolio will help the company navigate the current challenges. However, the uncertainty related to the new labor contract remains a drag.
With seven Buy, seven Hold, and three Sell recommendations, Ford stock sports a Hold consensus rating on TipRanks.
