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Will North America Segment Hurt General Motors' (GM) Q3 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 hurt the company’s third-quarter earnings, scheduled for an Oct 27 release before the bell.

(Also Read: Things to Note Ahead of General Motors' Q3 Earnings)

Q2 Highlights for GM’s North American Market

In the last reported quarter, wholesale unit volumes in the North American segment totaled 642,000 units, up from the 331,000 units reported in the year-ago quarter. Also, vehicles sold in the Unites States totaled 688,236, up 40% year on year.
Deliveries for the Cadillac and Buick brands were up 55% and 86% year on year, while Chevrolet and GMC deliveries climbed 31% and 50%, respectively. Also, Chevrolet’s Bolt EV and Traverse both delivered their best-ever second-quarter sales, while GMC recorded its best second quarter and best first half since 2005 driven by Yukon and Yukon XL sales.

Revenues in the North American segment came in at $27,932 million, higher than the year-ago quarter’s $11,604 million. The region reported an operating income of $2,894 million, reversing the loss of $101 million witnessed in the year-earlier period. The segmental profit also beat the consensus mark of $2,229 million. This outperformance was driven by solid customer demand for pick-ups and SUVs but slightly offset by tight inventories amid the global semiconductor crunch.

North American Market to Have Impaired GM in Q3

General Motors’ total sales in the United States during the September-end quarter plunged 32.8% year over year to 446,997 vehicles. This decline resulted from the ongoing semiconductor supply-chain disruption and historically low inventory levels.

During the third quarter, sales slumped across all four General Motors brands — Buick, Chevrolet, GMC and Cadillac.

Buick deliveries declined 20.1% year over year to 39,299 units. This underperformance stemmed from the decline in sales for the Enclave, Encore and revamped Envision, sales of which slid 23.3%, 64% and 4.23%, respectively.

Chevrolet sales plunged 36.1%, year over year, to 287,925 units. Chevrolet Silverado sales LD and HD sales were down 18.4% and 12.8%, year on year, respectively, during the quarter.

GMC deliveries fell 26.7% year on year on the declining sales of the Acadia, Canyon, Savana, Sierra and Terrain models. GMC Sierra LD and HD sales dipped 20.6% and 25.9%, year on year, respectively. Nonetheless, the Yukon and Yukon XL sales rose 7.31% and 64.46% year on year, respectively.

Cadillac’s third-quarter sales dropped 31.7% year on year to 22,519 units on the slumping sales of Cadillac CT4, CT5, XT4, XT5 and XT6.

Evidently, the Zacks Consensus Estimate for the third-quarter automotive revenues in the North American segment is pegged at $20,855 million, suggesting a fall from the $29,128 million recorded in the third quarter of 2020. Importantly, the consensus mark for wholesale volumes in the said segment is 457,000 units, calling for a decline from the 799,000 units reported in the prior-year quarter.

We believe declining revenues from the North American segment are likely to have affected General Motors’ third-quarter performance.  

General Motors — which shares space with auto biggies including Ford (F - Free Report) , Stellantis (STLA - Free Report) and Toyota (TM - Free Report) — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.