Ford Motor Company (NYSE: F) and Fiat Chrysler Automobiles N.V. (NYSE: FCAU), also known as FCA, are two major automobile manufacturers with global operations. Among FCA's well-known portfolio brands are Dodge, Jeep and Maserati. While Ford turned in better earnings in 2015, FCA has a stronger growth outlook, better efficiency ratios and similar financial health metrics. Of the analysts covering Ford, 10 rate it neutral, while nine rate it a buy or better. Of the analysts covering FCA, three rate it neutral, four rate sell, and two rate it a buy.
Ford's consolidated revenue grew 3.8% for the full-year 2015, bringing the five-year average to 3.01%. In 2015, operating income grew 115% while net income grew 131%. The disproportionate growth in earnings was driven primarily by a higher gross profit margin. Consensus analyst forecasts call for 3.4% and 2.1% revenue growth in 2016 and 2017, respectively, with 2% EPS growth followed by 5% expansion.
Fiat Chrysler's sales rose 18% in 2015, or 6% at a constant exchange rate, as the company benefited from depreciation of the euro versus the dollar. Adjusted earnings before interest and taxes (EBIT) fell 7.4%, with net profits declining to the lowest level in recent history. Analysts are calling for 26% EPS growth in 2017 followed by medium-term earnings growth in excess of 30%. Fiat Chrysler has the edge over Ford in recent top-line growth and forecast earnings expansion.
Ford's 15.4% gross margin in 2015 is a 3 percentage point improvement over 2014. Improving gross margin has helped Ford record 5.4% operating margin and 4.9% net margin, which are the highest levels achieved since 2011. Fiat Chrysler's gross margin was 13.0% in the year, marking the fourth consecutive year of decline. Narrow gross margins have weighed on operating margins, with the company reporting 1.07% for the operating profitability ratio. The 2015 net margin of 0.45% marks the fourth straight year at or below 1.0%. The spinoff of Ferrari N.V. (NYSE: RACE) will have a negative impact on margins for FCA.
Ford carries $90.0 billion in long-term debt, bringing its long-term debt-to-total capital ratio to 0.76. The debt-to-equity ratio, in which debt is defined as all liabilities, was 6.85 in 2015. FCA carries $37.4 billion in debt, resulting in a long-term, debt-to-total capital ratio of 0.72. The debt-to-equity ratio was 6.29 in 2015. Using these common financial leverage ratios, it appears the companies have similar capital structures and bear comparable amounts of risk related to financial leverage.
According to Morningstar, Ford's current ratio was 3.31 in 2015, while the quick ratio was 3.15, indicating very low liquidity risk. However, many investors oppose liquidity ratios of this magnitude, because they might indicate inefficient use of capital. If the business cannot invest working capital on internal projects to drive returns, then some investors would demand the capital be returned to shareholders as dividends or share repurchases. Ford's substantial financing operations contribute to high liquidity ratios. FCA's current ratio was 1.33 in 2015, and the quick ratio was 0.82. Neither of these liquidity ratios indicates substantial risk, especially relative to other major automobile manufacturers.
Ford's receivable turnover ratio was 1.54 in 2015, lower than any year since 2009. While this efficiency ratio has not changed drastically, it does indicate a steady deterioration in Ford's collection times. Inventory turnover was 15.63 in 2015, and like receivable turnover, this was the lowest value since 2009. Asset turnover of 0.69 is slightly below the other values achieved in recent years. While revenue and cost of sales growth have been inconsistent across the past five years, receivables, inventories and total assets have trended steadily upward, leading to lower efficiency ratios.
FCA's receivable turnover at 16.9 was much higher than Ford's due to significantly lower financing receivables with fewer sales on credit. Fiat Chrysler's inventory turnover ratio of 7.9 marks continued progress on this item, reaching a new 10-year high, though it still lags Ford's figure. Asset turnover of 1.11 is superior to Ford's effort and represents the highest values achieved by FCA in recent years.