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Will North America Segment Aid General Motors' (GM) Q4 Earnings?

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General Motors’ (GM - Free Report) North American market segment — which contributes a bulk of the company’s overall revenues — is likely to have fueled the company’s fourth-quarter earnings, scheduled for a Feb 10 release before the bell.

(Also Read: General Motors to Report Q4 Earnings: What Lies Ahead? )

Q3 Highlights for GM’s North American Market

In the last reported quarter, wholesale unit volumes in the North American segment totaled 799,000 (which accounts for more than 80% of the total vehicle sales), marginally down 0.25% year over year. Also, vehicles sold in the Unites States totaled 665,192, down 10% year on year. Nonetheless, sales improved sequentially each month within the quarter.

Sales for both Chevrolet Blazer and the Cadillac XT6 climbed 45% each in the third quarter compared with the prior-year quarter. Sales of Buick’s compact SUV, the Envision, jumped 44%. The company’s all-new crossovers — the Chevrolet Trailblazer and Buick Encore GX — continued to gain momentum. Moreover, despite the tight inventory, the company’s large pick-up trucks sold well, especially heavy-duty pickups.

Encouragingly, revenues in the North American segment came in at $29,128 million, higher than the year-ago quarter’s $27,971 million. The region reported an operating income of $4,366 million, higher than the year-ago profit of $3,023 million, reflecting robust customer demand for new vehicles and services, especially the company’s full-size pickups and SUVs.

North American Market to Have Aided GM in Q4

General Motors’ strong and wining product portfolio in North America, led by its full-size pick-up trucks and SUVs, is likely to have performed well during the fourth quarter. In fact, the company witnessed its best fourth-quarter retail sales since 2007, on the outstanding performance of the Chevrolet, GMC and Cadillac models.

Markedly, General Motors’ retail sales in the United States during the December-end quarter jumped to 771,323 vehicles from the prior quarter’s 665,192 vehicles. In fact, total sales for the quarter were up 5 percent year over year. Average transaction prices set record for fourth-quarter and full-year 2020 at $41,886 and $39,229, respectively.

For the second consecutive year, the GMC Sierra witnessed the best fourth quarter, with total deliveries up 14% year on year. The fourth-quarter GMC and Chevrolet deliveries were up 14% and 12%, respectively during this period. Chevrolet Silverado crew cabs marked the best quarter and calendar-year retail and total sales ever, and the Chevrolet Traverse recorded the best-ever fourth-quarter total and retail sales. Seven of every 10 full-size SUV retail units sold in the fourth quarter were a Chevrolet Tahoe, Suburban or GMC Yukon chiefly owing to robust demand for all-new models.

Cadillac, in fact, registered the best fourth-quarter retail share and sales since 2016. Retail deliveries were up 16% during the October-December quarter, backed by the successful launches of CT4, CT5 and Escalade.

Evidently, the Zacks Consensus Estimate for fourth-quarter automotive revenues in the North American segment is pegged at $28,547 million, suggesting a jump from the $22,706 million recorded in the fourth quarter of 2019.  Remarkably, the consensus mark for the operating income from the said segment is pinned at $2,975 million, indicating skyrocketing growth of 1,031% from the prior-year figure. Importantly, the consensus mark for wholesale volumes in the said segment is 821,000 units, calling for a year-on-year jump of 20%.

We believe, stellar revenues from the North American segment are likely to have fueled the Zacks Rank #3 (Hold) company’s fourth-quarter bottom line, partly offset by declining revenues from the International markets.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Here are a few other stocks lined up to release fourth-quarter results in February. Encouragingly, our model predicts an earnings beat for these stocks:

BorgWarner (BWA - Free Report) has an Earnings ESP of +2.94% and carries a Zacks Rank #3, currently. The company is scheduled to report quarterly numbers on Feb 11.

Allison Transmission Holdings (ALSN - Free Report) has an Earnings ESP of +7.44% and carries a Zacks Rank #3 at present. The company will announce fourth-quarter 2020 results on Feb 17.

Magna International (MGA - Free Report) has an Earnings ESP of +5.42% and currently flaunts a Zacks Rank of 1. The company is slated to release earnings figures on Feb 19.

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