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General Motors (GM) Q4 Earnings Top Estimates, Sales Lag

General Motors GM reported adjusted earnings of 5 cents per share in fourth-quarter 2019 against the Zacks Consensus Estimate of loss of 11 cents. Better-than-expected revenues from North America led to the outperformance. However, the bottom line declined 96.5% from the year-ago figure amid the UAW strike. Notably, the work stoppage cost the company $2.6 billion in earnings before interest and taxes during the quarter.

The top U.S. carmaker reported revenues of $30,826 million, missing the Zacks Consensus Estimate of $35,249 million. Moreover, the top line decreased from the year-ago figure of $38,399 million.

The automaker’s global market share was 10.8% in the reported quarter, reflecting a decline from 11.5% in the year-ago period.

General Motors Company Price, Consensus and EPS Surprise

 

General Motors Company price-consensus-eps-surprise-chart | General Motors Company Quote

Segment Results

GM North America (GMNA) generated net revenues of $22.7 billion in fourth-quarter 2019, down from $29.8 billion recorded in the corresponding period of 2018. Nonetheless, revenues from the GMNA unit outpaced the Zacks Consensus Estimate of $20.6 billion. Profits from the segment tumbled to $263 million from the year-ago level of $3,041 million. The results were adversely affected by the UAW strike. Four weeks of vehicle production was lost in the fourth quarter due to the work stoppage, resulting in lower vehicle sales, revenues and profits. Notably, vehicle sales came in at 684,000 units, reflecting a year-over-year decrease of 23.6%.

GM International’s (GMI) net revenues were $4.4 billion, which declined from $4.9 billion in the year-ago quarter. Revenues from the GMI segment also lagged the Zacks Consensus Estimate of $4.9 billion. Notably, vehicle sales came in at 268,000 units, reflecting a year-over-year decrease of 15.2%. The unit recorded an operating loss of $120 million, wider than the loss of $48 million a year ago. Sagging vehicle sales in China amid economic slowdown and trade tussle negatively impacted the segment.

GM Financial generated net revenues of $3.63 billion in the quarter under review, reflecting a rise from $3.59 billion recorded in the year-ago period. The segment recorded operating profit of $498 million, missing the Zacks Consensus Estimate of $595 million. Nonetheless, operating income increased 19.7% year over year. Higher average earning assets and improved residual values led to the improved results.

GM Cruise generated net revenues of $25 million in fourth-quarter 2019. The segment reported operating loss of $305 million, wider than $194 million loss in the prior-year quarter.

Dividend & Financials

General Motors recently announced first-quarter 2020 dividend of 38 cents a share, payable on Mar 20 to its shareholders of record as of Mar 6, 2020.

General Motors had cash and cash equivalents of $19.1 billion as of Dec 31, 2019 compared with $20.8 billion in the corresponding period of 2018. Long-term automotive debt stands at $12.5 billion.

The company recorded negative adjusted automotive free cash flow (FCF) of $1.3 billion in fourth-quarter 2019, comparing unfavorably with FCF of $4.2 billion in the prior-year period. Labor strike took a heavy toll on free cash flow during the quarter.

2020 Guidance

While macro-economic headwinds will continue to weigh on General Motors’ sales, the company is likely to benefit from vehicle launches and cost-cut efforts in 2020. The firm forecasts adjusted EPS between $5.75 and $6.25 per share. The company expects adjusted automotive free cash flow within $6-$7.5 billion.

Zacks Rank & Stocks to Consider

General Motors currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector include Gentherm Inc. THRM , Gentex Corporation GNTX and SPX Corporation SPXC, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gentherm has a projected earnings growth rate of 20.6% for the current year. Its shares have gained 11.4% over the past year.

Gentex Corp. has an estimated earnings growth rate of 7.3% for 2020. The company’s shares have appreciated 47.6% in a year’s time.

SPX has an expected earnings growth rate of 8.1% for the current year. The stock has rallied 62.5% in the past year.

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