Credit Suisse Prefers Ford Over General Motors Heading Into Q1 Print

In a report published Thursday, Credit Suisse analyst Dan Galves previewed General Motors Company GM and Ford Motor Company F's upcoming first quarter results, noting both are expected to report an in-line quarter.

"The industry continues to show substantial discipline, with modest declines in car pricing being offset by better truck pricing," Galves wrote. "We continue to believe that a combination of flattening SAAR growth, rising rates, declining used car pricing, and added Japanese content will lead to a pricing correction at some point, but near-term risks appear low."

Ford: The Positives Outweigh Negatives

Ford's outlook has improved since September of last year with a "flawless" F150 launch, solidified pricing and "meaningful" mix shifts. On the other hand, the analyst stated that investors appear to be bracing for a tough quarter, with a reluctance to own shares into the print.

Galves said that "the positives outweigh the negatives" and the fact that the first quarter will be the lowest profit quarter of the year has been "very well-flagged."

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General Motors: Solid Q1 Already Priced In

Galves noted that some investors are expecting General Motors to report a beat, primarily due to favorable North American pricing and mix. However, the analyst added that its market share performance has been "muted" to start the year as its European share has been "holding its own," but all other key regions are down modestly, especially in the U.S. where its market share in March fell to 17.4 percent from 17.9 percent a year ago.

Galves said that annualized production from October 2014 through March 2015 was down 1.4 percent versus 2014 total production. While the company can return to flat levels in 2015, this will fall short of consensus estimates of 2 to 3 percent growth.

The capacity mismatch has impacted General Motors sales volume in March and it is likely this was encompassed in the company's January guidance, but may not be properly reflected in investor models.

Bottom line, General Motors, like Ford, benefited from lower fuel prices, better vehicle pricing but this is already reflected in expectations and as such near-term earnings upside are "more challenging."

Analyst Ratings

Shares of General Motors remain Underperform rated with an unchanged $33 price target.

Shares of Ford remain Neutral rated with a price target raised to $16 from a previous $14.