Back to top

Analyst Blog

On May 9, we maintained our Neutral recommendation on General Motors Company (GM - Analyst Report), based on its focus on the emerging markets and improvement from its major expansion plan across the globe. However, we are concerned about its significant exposure to Europe and year-over-year decline in profits in the first quarter of 2013.

Why Maintained?

On May 2, General Motors Co. reported a 28.0% fall in earnings per share to 67 cents in first quarter 2013, despite beating the Zacks Consensus Estimate by 11 cents. The decline in earnings was due to lower profits generated from all the geographic operations of the company except Europe.

Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6% rise in retail unit sales to 2.4 million vehicles globally. However, it was higher than the Zacks Consensus Estimate of $36.4 billion.

Following the release of the first-quarter results, the Zacks Consensus Estimate for fiscal 2013 decreased 4.9% to $3.31 per share. The Zacks Consensus Estimate for fiscal 2014 dropped 2.2% to $4.37 per share. Currently, shares of General Motors maintains a Zacks Rank #3 (Hold).

General Motors is expanding its footprint in emerging markets including Brazil, China and India. The company expects its global expansion strategy to enhance its sales and help meet the rising demand.

General Motors is expected to benefit from the agreement with the United Auto Workers (UAW) and Canadian Auto Workers (CAW) union. Under these agreements, the company will be able to minimize its labor costs.

However, the company faces challenges from the ongoing financial crisis in the euro zone. The European division saw a 17.6% fall in revenues to $22.1 billion in 2012 and an 8.3% decline to $4.8 billion in the first quarter of 2013. In addition, strengthening of the U.S. dollar against most of the currencies of countries where General Motors operates will mar the company sales.

Other Stocks to Look For

Few stocks that are performing well in the broader industry include Visteon Corp. (VC - Snapshot Report), Tower International, Inc. (TOWR - Snapshot Report) and Denso Corp. (DNZOY). All the companies carry a Zacks Rank #1 (Strong Buy).
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%