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GM May Report Lower Q1 Earnings

 May 02, 2012 02:57 PM
 


(By Mani) Automaker General Motors Corp. (NYSE:GM) is expected to report lower earnings when it reports its first quarter results on May 3.

GM's European business is its biggest drag as volumes and pricing are weakening margins. Pricing appears likely to trend lower until either volumes rebound or capacity exits the industry. Neither seems to be likely in the near term. GM is working on its EU restructuring plan of capacity cuts, and possibly using partial work weeks in the near-term.

The first quarter is also expected to be weighed down by the weaker European market, partially offset by a pickup in truck volumes.

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Wall Street expects GM to earn 85 cents a share, a decline of 10.5 percent from 95 cents earned last year. Detroit-based GM's earnings have managed to top analysts' consensus expectations in three out of the past four quarters. The earnings expectations have also improved from 81 cents 60 days ago to the current 85 cents a share.

Quarterly revenues are estimated to grow 3.8 percent to $37.59 billion. The company has delivered revenue growth of 11 percent, 8 percent, 19 percent and 15 percent in the preceding four quarters, respectively.

On May 1, GM reported a 8.2 percent decrease in April sales, yet raised its 2012 sales outlook based on higher-than-expected first quarter industry sales and expectations that the U.S. economy will continue to grow.

Total sales for the month of April were 213,387 vehicles. Retail sales were essentially equal to April 2011. On a selling-day adjusted basis, GM sales were up 3 percent, and retail sales were up 12 percent.The company lifted its light vehicle sales guidance to 14.0 million to 14.5 million units from the previous forecast of 13.5 million to 14.0 million units.

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During the quarter, GM said that the company would buy a 7 percent stake in the Paris-based automaker PSA Peugeot Citroën, making it the second-largest shareholder in Peugeot behind the Peugeot Family Group.

Early March, GM had recalled 18,204 imported sport utility vehicles in China due to their anti-lock breaking systems that may cause a safety hazard, according to the statement on the website of the nation's General Administration of Quality Supervision, Inspection and Quarantine. The recall affected 16,618 Chevrolet Captiva vehicles and 1,586 Opel Antara vehicles built between April 11, 2006 and November 9, 2009.

Competitor Performance

Rival, Ford Motor Co. (NYSE:F) also reported a plunge in first-quarter profit due to European woes. Yet, earnings and revenues topped Wall Street estimates. Net income attributable to the company plunged to $1.40 billion from last year's $2.55 billion. On a per share basis, net income fell to 35 cents from 61 cents.

Excluding items, Ford's earnings declined to 39 cents a share from 47 cents a share. On average, 17 analysts polled by Thomson Reuters expected earnings per share of $0.35 for the quarter. Analysts' estimates typically exclude one-time items. Excluding special items, revenues slipped to $32.4 billion from $33.1 billion.

Analysts Opinion

Out of 20 analysts covering the company, 16 rate it as "strong buy" or "buy," while 4 of them rate it as "hold." There were no "sell" rating on the stock. Sixteen analysts have a mean price target of $35.25 on GM shares, with high and low end target price at $45 and $26, respectively.

Comparatively, Ford has been rated "strong buy: or "buy" by 14 of the 19 analysts covering the stock, while 5 analysts rate it as "hold." Similarly, there were no "sell" rating on the stock. The mean price target of 13 analysts is $15.85, with a high target of $18 and low target of $13.

Share Performance

Shares of GM have gained 10.74 percent year-to-date, while Ford has gained only 1 percent during the period. Meanwhile, S&P 500 index have increased 11.45 percent during the year-to-date period.
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