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What's in Store for General Motors (GM) This Earnings Season?

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General Motors (GM - Free Report) is slated to release first-quarter 2020 results on May 6, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 18 cents per share on revenues of $32.59 billion.

The automaker delivered solid results in the last reported quarter on higher-than-anticipated profits in the North American segment. General Motors beat estimates in each of the trailing four quarters, the average positive surprise being 58.82%. This is depicted in the graph below:

General Motors Company Price and Consensus

Which Way are the Estimates Headed?

Hit by the coronavirus crisis, the Zacks Consensus Estimate for General Motors’ first-quarter earnings per share has remained unrevised at 18 cents for the past week. This compares unfavorably with the year-ago quarter’s $1.41 per share. The Zacks Consensus Estimate for revenues also suggests a year-over-year decrease of 6.57%.

Factors that Might Have Influenced Q1 Performance

The company’s SUVs and crossover vehicles, which account for majority of its sales volumes, are becoming popular on low interest rates and gas prices. However, General Motors is expected to have witnessed a decline in sales volumes amid industry headwinds. Heightening coronavirus fears, especially in March, are likely to have thwarted vehicle demand. Lower vehicle sales amid a weakening consumer demand and soft economic conditions are expected to have hurt company’s quarterly revenues. General Motors also withdrew the 2020 guidance, and suspended stock buybacks and quarterly dividends in the to-be-reported quarter.

General Motors’ customer deliveries in the United States in the quarter under review decreased 7% from the prior-year period to 618,335 deliveries, as the coronavirus outbreak marred demand for vehicles.

Further, the Zacks Consensus Estimate for the company’s Automotive segment’s net sales is pegged at $28.2 billion, suggesting a $31.3-billion plunge year on year. The consensus estimate for net sales in the International and North America segments are pegged at $3,147 million and $24,981 million for the first quarter, calling for a decline from the prior year’s $3,850 million and $27,365 million, respectively. Moreover, the Zacks Consensus Estimate for the Financial segment’s net sales is expected to be $3,323 million, suggesting a decline of 8.2% year over year.

Furthermore, General Motors’ elevated product-launch costs, R&D expenses and capital expenditure are expected to have clipped margins during the March-end quarter. In addition to inflating costs for repairing defects, frequent recalls and criminal investigation might also have reduced consumer confidence in the brand.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for General Motors this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: General Motors has an Earnings ESP of +42.59%. This is because the Most Accurate Estimate of 26 cents per share comes in eight cents higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: General Motors carries a Zacks Rank of 5 (Strong Sell) currently.

Stocks to Consider

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

Axon Enterprise, Inc has an Earnings ESP of +18.31% and carries a Zacks Rank #3 currently. The company is slated to release first-quarter 2020 earnings on May 7.

The Allstate Corporation (ALL - Free Report) is set to report quarterly numbers on May 6. The company has an Earnings ESP of +2.45% and holds a Zacks Rank of 3, at present.

Arbor Realty Trust (ABR - Free Report) is scheduled to announce earnings figures on May 8. The stock has an Earnings ESP of +1.59% and currently carries a Zacks Rank #3.

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