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Analyst Blog

On Jan 23, 2014, Zacks Investment Research downgraded General Motors Company (GM - Analyst Report) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Many analysts covering General Motors revised their earnings estimates for 2014 downward in the last 60 days. This resulted in a 5% decline in the Zacks Consensus Estimate to $4.42 per share.

General Motors recorded adjusted earnings of $1.6 billion or 96 cents per share in the third quarter of the year, beating the Zacks Consensus Estimate of 91 cents per share. 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.

Results of the International Operations segment was disappointing. It reported a 6.8% decline in revenues to $5.3 billion. Adjusted earnings before interest and taxes (EBIT) plunged 62.5% to $0.3 billion from $0.8 billion recorded in the comparable quarter of 2012.

The financial crisis in the Euro zone affected operations of the company. GM Europe saw a 4.25% decline in revenues to $14.83 billion in the first nine months of 2013.

Further, Moody’s Investors Service of Moody's Corporation (MCO - Analyst Report) recently revealed that it considers General Motors’ decision to reinstate quarterly dividends as a credit negative.

Moreover, the Zacks Consensus Estimate for General Motors’ fourth-quarter 2013 earnings declined 6.9% to 87 cents per share after the announcement of the third-quarter results.

Other Stocks to Consider

Some better-ranked stocks in the automobile sector are Harley-Davidson, Inc. (HOG - Analyst Report) and Tesla Motors, Inc. (TSLA - Analyst Report), both of which carry a Zacks Rank #2 (Buy).

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