General Motors Stays Neutral - Analyst Blog
May 10 2013 - 11:10AM
Zacks
On May 9, we maintained our Neutral recommendation on
General Motors Company (GM), based on its focus on
the emerging markets and improvement from its major expansion plan
across the globe. However, we are concerned about its significant
exposure to Europe and year-over-year decline in profits in the
first quarter of 2013.
Why Maintained?
On May 2, General Motors Co. reported a 28.0% fall in earnings per
share to 67 cents in first quarter 2013, despite beating the Zacks
Consensus Estimate by 11 cents. The decline in earnings was due to
lower profits generated from all the geographic operations of the
company except Europe.
Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6%
rise in retail unit sales to 2.4 million vehicles globally.
However, it was higher than the Zacks Consensus Estimate of $36.4
billion.
Following the release of the first-quarter results, the Zacks
Consensus Estimate for fiscal 2013 decreased 4.9% to $3.31 per
share. The Zacks Consensus Estimate for fiscal 2014 dropped 2.2% to
$4.37 per share. Currently, shares of General Motors maintains a
Zacks Rank #3 (Hold).
General Motors is expanding its footprint in emerging markets
including Brazil, China and India. The company expects its global
expansion strategy to enhance its sales and help meet the rising
demand.
General Motors is expected to benefit from the agreement with the
United Auto Workers (UAW) and Canadian Auto Workers (CAW) union.
Under these agreements, the company will be able to minimize its
labor costs.
However, the company faces challenges from the ongoing financial
crisis in the euro zone. The European division saw a 17.6% fall in
revenues to $22.1 billion in 2012 and an 8.3% decline to $4.8
billion in the first quarter of 2013. In addition, strengthening of
the U.S. dollar against most of the currencies of countries where
General Motors operates will mar the company sales.
Other Stocks to Look For
Few stocks that are performing well in the broader industry include
Visteon Corp. (VC), Tower International,
Inc. (TOWR) and Denso Corp. (DNZOY). All
the companies carry a Zacks Rank #1 (Strong Buy).
DENSO CORP (DNZOY): Get Free Report
GENERAL MOTORS (GM): Free Stock Analysis Report
TOWER INTL INC (TOWR): Free Stock Analysis Report
VISTEON CORP (VC): Free Stock Analysis Report
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