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Why Is General Motors Company (GM) Up 8.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for General Motors Company (GM - Free Report) . Shares have added about 8.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is General Motors Company due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

General Motors Q1 Earnings Beat, Sales Miss Mark

General Motors reported adjusted earnings of $2.25 per share for first-quarter 2021, breezing past the Zacks Consensus Estimate of $1.02. The bottom line was also significantly higher than the year-ago earnings of 62 cents per share amid cost-containment efforts, and robust demand for SUVs as well as pickups.

However, revenues of $32,474 million missed the Zacks Consensus Estimate of $33,260 million. Revenues also slipped from the year-ago figure of $32,709 million. The company recorded adjusted earnings before interest and taxes (EBIT) of $4,417 million, significantly up from $1,250 million in the prior-year quarter. The upside can be attributed to the launch of SUVs, effective pricing on pickups and strong used-car prices.

The automaker’s market share in the GM market was 10.1% for the reported quarter, decreasing from the year-ago period’s 10.4%.

Segmental Performance

GM North America (GMNA) generated first-quarter net revenues of $25,957 million, up from $25,831 million recorded in the corresponding period of 2020. Also, revenues from the unit outpaced the Zacks Consensus Estimate of $23,811 million. While the region’s wholesale vehicle sales of 664,000 units declined from 775,000 units in the comparable year-ago quarter, the segment’s operating profit increased 42.8% to $3,134 million. The segmental profit also outpaced the consensus mark of $1,917 million. The results marked an improvement primarily owing to newly launched full-size SUVs, and improved pricing on pickups owing to tight inventory and high demand for the same.

GM International’s (GMI) net revenues for the reported quarter were $3,086 million, down from the year-ago quarter’s $3,280 million on lower year-over-year vehicle sales. The unit turned an operating profit of $308 million against the year-ago loss of $551 million and the consensus estimate of a loss of $42 million owing to strong pricing, vehicle launches and benefits from cost-containment actions.

GM Financial generated net revenues of $3,407 million for the March-end quarter, down from $3,561 million recorded in the year-ago period. Nonetheless, the segment recorded an operating profit of $1,182 million, jumping from $230 million witnessed in the prior-year quarter and beating the consensus mark of $871 million. This upswing resulted from the positive impact of high used-vehicle prices, strong credit performance and reduced interest expense.

GM Cruise witnessed net revenues of $30 million for the first quarter, up from $25 million reported in the year-earlier period. The segment posted an operating loss of $229 million compared with $228 million loss reported in the prior-year quarter.

Financial Position

General Motors had cash and cash equivalents of $21.6 billion as of Mar 31, 2021 compared with $19.9 billion at 2020-end. Long-term automotive debt at the end of the quarter under review was $16.4 billion compared with $16.2 billion as of Dec 31, 2020.

General Motors’ automotive liquidity amounted to $37.2 billion at the end of the January-March quarter. The company recorded adjusted negative automotive free cash flow (FCF) of $1.9 billion for first-quarter 2021, comparing unfavorably with negative FCF of $903 million in the prior-year period.

2021 View

The company expects 2021 adjusted EBIT and EPS per share in the band of $10-$11 billion and $4.5-$5.25, respectively. Adjusted automotive FCF is envisioned between $1 billion and $2 billion. 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -38.08% due to these changes.

VGM Scores

Currently, General Motors Company has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, General Motors Company has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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