Back to top

Image: Bigstock

Will Surging Sales in China Drive General Motors' (GM) Q1 Earnings?

Read MoreHide Full Article

General Motors’ GM first-quarter 2021 earnings are likely to have benefited from the rising vehicle sales in China, where the company commands a strong presence. The company is set to release quarterly results on May 5, before market open.

(Also Read: Factors Shaping the Fate of General Motors' (GM) Q1 Earnings)

Q4 Highlights for GM’s China Market

In the last reported quarter, vehicles sold in China totaled 954,325, up 14% year on year, marking a second increase in calendar-year 2020. This outperformance was attributed to surging sales of the Buick, Cadillac and Wuling brands, partly offset by dip in the sales of Chevrolet and Baojun models.
Sales for Buick, Wuling and Cadillac climbed 28%, 35%, and 56%, respectively in the fourth quarter compared with the prior-year period. However, sales of Baojun and Chevrolet decreased 30% and 16%, respectively, on a year-on-year basis.

China Market to Boost GM’s Q1 Results

The auto sector in China has been battling a slump since hitting its peak in 2017, thanks to the rigid emission standards, rising popularity of ride-sharing platforms and a sluggish economy. Moreover, the coronavirus pandemic, which originated in China, further aggravated this sales slump.
Nonetheless, China, the world’s biggest auto market, was the first nation to reopen its economy after the health crisis was declared under control last March. The Chinese market began to recover in the second quarter of 2020, supported by government stimulus measures to drive vehicle sales. Since then, the monthly Chinese auto sales have been registering growth after hitting rock bottom in March 2020.

For General Motors, things started improving in the second half of 2020, and the gained momentum in China has continued since then. The company’s focus on strengthening its product line-up with more customer-centric products and enhancing customer experience in China is likely to have buoyed the first-quarter performance. Aggressive portfolio optimization with high-end sport utility vehicles (SUVs), multi-purpose vehicles (MPVs) and luxury vehicles are anticipated to have boosted margins during the quarter under discussion.

Markedly, during the first quarter of 2021, General Motors’ total vehicle sales in the Chinese market totaled more than 780,000 vehicles, jumping 69% year on year.

The mass-market brand Buick deliveries witnessed a 73% surge in the first quarter from the prior-year level to more than 224,000 units. Sales of GL8 MPV, Envision SUV and LaCrosse sedan came in at 42,000, 29,000 and 13,000 units, respectively.
The luxury brand Cadillac deliveries summed 57,000 units in the quarter under discussion, marking a year-on-year jump of a whopping 114%. Its SUV portfolio — comprising XT4, XT5 and XT6 — also registered a solid performance, with collective sales of more than 34,000 units.

The no-frills brand Wuling sales doubled year over year to more than 347,000 units, as the brand maintained its dominant position in commercial vehicles. Sales of Hong Guang mini-EV exceeded 72,000 units, retaining its position as the best-selling green vehicle in the country.

Chevrolet recorded sale of more than 64,000 vehicles in the first quarter, reflecting a 27% year-over-year rise. Improvement in the brand’s SUV mix, led by Blazer and revamped Equinor, aided this sales growth. Also, sales of Malibu XL flagship sedan surpassed 13,000 units.

Baojun sold more than 86,000 units during the January-March period. In a bid to increase its appeal to the youth generation, the brand is adding the Valli mid-size wagon passenger vehicle to its line-up.

Additionally, amid the heightening climate-change concerns, General Motors is fast switching gears to electric vehicles (EVs) in China with the help of its modular battery platform, Ultium Drive system. This is likely to positively reflect in its quarterly results.

Evidently, the Zacks Consensus Estimate for first-quarter automotive revenues for the company’s International segment is pegged at $3,338 million, suggesting a jump from the $3,280 million recorded in the first quarter of 2020. Importantly, the consensus mark for wholesale volumes in the said segment is 194,000 units, calling for a rise from the 191,000 units sold in the prior-year quarter.  

We believe robust vehicle sales from the China segment are likely to have fueled the Zacks Rank #3 (Hold) company’s first-quarter top and bottom lines.

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

Other Stocks to Consider

Here are a few other stocks worth considering, as these too have the right combination of elements to come up with an earnings beat this time around:

Credicorp Ltd BAP has an Earnings ESP of +2.68% and carries a Zacks Rank #3 at present. The company will announce quarterly results on May 6.

American Axle & Manufacturing Holdings (AXL - Free Report) has an Earnings ESP of +0.53% and currently carries a Zacks Rank of 3. The company is slated to release earnings figures on May 7.

American Well Corporation (AMWL - Free Report) has an Earnings ESP of +9.44% and carries a Zacks Rank #3, currently. The company is scheduled to report quarterly numbers on May 12.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

American Axle & Manufacturing Holdings, Inc. (AXL) - free report >>

American Well Corporation (AMWL) - free report >>