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General Motors (GM) Likely to Invest $2.73B at Hubs in Brazil

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General Motors Company (GM - Free Report) is working on feasibility conditions to invest $2.73 billion (10 billion reais) in Brazil within four years, per Reuters. This billion-dollar investment plan is expected to begin in 2020 and last until 2024. The company has added that it is about to complete theexisting investment plan of 13 billion reais in 2019, which began in 2014.

The U.S. automaker is in talks with Brazil’sunions, suppliers, dealers and the government for its additional investment of 10 billion reais for the development of factories at Sao Caetano do Sul and Sao Jose dos Campos.

In the last month, General Motors announced that further investment in the emerging economy would depend on its profitability. The company also informed that it was in talks with Sao Paulo state for tax incentives. Further, this automaker warned employees that it might opt for sacrifices to turn its operation in Brazil into a profitable one. The announcement raised concerns about job cuts and closing assembly lines among employees.

General Motors Company Price and Consensus

 

The company aims to attain a sustainable future with its Brazilian investments to face challenges in the competitive industry. Per Valor Economico, General Motors is likely to invest in its Brazilian product line until 2022 and is expected to enjoy tax incentives beginning 2023. Despite holding a leading position in the Brazilian market, the company witnessed loss of 1 billion reais in 2018.

Of late, consumers’ higher disposable income in developing nations has led to rising vehicle sales in these economies. Additionally, weakening sales in developed countries pushed carmakers to focus on developing economies to sustain their businesses.

In January 2019, General Motors announced that it plans to introduce eight vehicle models, with shared designs and components in emerging economies, consisting China, Brazil and Mexico. Launching these models will replace the existing vehicles that cannot be manufactured efficiently.

Despite high tariff-related costs and weakening demand in China, the company expects to surpass earnings in 2018. It anticipates earnings to exceed the previously mentioned $5.80-$6.20 per share in 2018. General Motors is scheduled to announce fourth-quarter and 2018 earnings on Feb 6.

For 2019, this Detroit-based automaker pinned high hopes on its new vehicle line-ups of trucks, crossovers and SUVs. In fact, the company expects earnings of $6.50-$7.00 per share this year compared with the previously stated range for 2018. Further, it expects adjusted cash free cash flow of $4.5-$6 billion for2019.

Price Performance

Over the past three months, shares of General Motors have gained 6.8% against the industry’s decrease of 2.1%.

 

Zacks Rank &Other Stocks to Consider

General Motors currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader auto sector are Oshkosh Corporation (OSK - Free Report) , Honda Motor Co., Ltd. (HMC - Free Report) , and Meritor, Inc. (MTOR - Free Report) , each presently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Oshkosh Corporation has an expected long-term growth rate of 14.6%. The company’s stock has seen the Zacks Consensus Estimate for earnings in fiscal 2019 being revised 5% upward over the past seven days.

Honda has an expected long-term growth rate of 2.9%. The company’s stock has seen the Zacks Consensus Estimate for earnings in fiscal 2019 being revised 2% upward over the past seven days.

Meritor has an expected growth rate of 9.9% for the current fiscal year. The company’s stock has seen the Zacks Consensus Estimate for earnings in fiscal 2019  being revised 4% upward over the past seven days.

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