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General Motors Beats on Q3 Earnings & Revs

F HMC DDAIF GM

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General Motors Co. (GM - Analyst Report) recorded adjusted earnings of $1.6 billion or 96 cents per share in the third quarter of 2013, beating the Zacks Consensus Estimate of 91 cents per share. In comparison, the company generated earnings of $1.6 billion or 93 cents per share in the third quarter of 2012.

Including a net loss of $0.9 billion or 51 cents per share from special items in the reported quarter, net income (on a reported basis) amounted to $0.7 billion or 45 cents per share, compared with $1.5 billion or 89 cents per share in the year-ago quarter.

All the businesses, except International Operations, performed well during the quarter.

Revenues in the quarter grew 3.7% year over year to $39 billion, beating the Zacks Consensus Estimate of $38.7 billion.

Worldwide wholesale unit sales inched up 0.5% to 1.6 million vehicles in the quarter. Worldwide retail unit sales rose 5.5% to 2.4 million vehicles. The automaker occupied a worldwide market share of 11.7% at the end of the quarter, marginally up from 11.6% a year ago.

Adjusted earnings before interest and tax (EBIT) went up 13% to $2.6 billion from $2.3 billion in the third quarter of 2012. Operating profit surged 40.7% to $2.3 billion from $1.6 billion a year ago.

Segment Results

GM North America (GMNA) reported a 5.2% rise in revenues to $23.5 billion during the quarter. Adjusted EBIT increased 29.4% to $2.2 billion from $1.7 billion in the third quarter of 2012.

GM Europe (GME) witnessed a 3.3% increase in revenues to $4.9 billion. The region showed improvement as it reported a narrower year-over-year adjusted loss of $0.2 billion compared with $0.5 billion in the year-ago quarter.

GM International Operations (GMIO) results were disappointing. It reported a 6.8% decline in revenues to $5.3 billion. Adjusted EBIT plunged 62.5% to $0.3 billion from $0.8 billion in the comparable quarter of 2012.

GM South America (GMSA) witnessed a 2.5% increase in revenues to $4.4 billion. Adjusted EBIT increased to $0.3 billion in the quarter compared with $0.2 billion in the third quarter of 2012.

GM Financial reported an impressive 68.7% rise in revenues to $867 million during the quarter. EBIT in the segment stayed in line with the year-ago quarter level of $0.2 billion.

Financial Position

GM had cash and cash equivalents of $20.4 billion as of Sep 30, 2013 compared with $18.4 billion as of Dec 31, 2012. Total debt (Automotive and Financial) increased significantly to $32.1 billion as of Sep 30, 2013 from $16.1 billion as of Dec 31, 2012. Consequently, debt-to-capitalization ratio increased to 46.6% as of Sep 30, 2013 from 30.7% at the end of 2012.

During the third quarter, the company had a net cash flow of $3.3 billion from automotive operations, up from $3.1 billion in the year-ago period. After deducting $1.9 billion of capital expenditure in both the reported and the year-ago quarter, the company’s free cash flow stood at $1.3 billion during the quarter compared with $1.2 billion a year ago.

Our Take

GM is a leading global automotive company. The company has presence in almost 120 countries and has facilities located in 30 countries. It currently retains a Zacks Rank #2 (Buy).

GM’s rival Ford Motor Co. (F - Analyst Report) posted a 12.5% rise in earnings per share of 45 cents in the third quarter of 2013, up from 40 cents in the same quarter of 2012 (all excluding special items). With this, the company has beaten the Zacks Consensus Estimate of 38 cents. The business in most geographic regions improved during the quarter.

Other major automobile stocks worth considering are Daimler AG (DDAIF) and Honda Motor Co., Ltd. (HMC - Analyst Report). While Daimler is a Zacks Rank #1 (Strong Buy) stock, Honda carries a Zacks Rank #2 (Buy).

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