Can North American Unit Aid General Motors (GM) Q3 Earnings?

General Motors (NYSE:GM) is slated to release third-quarter 2019 results on Oct 29, before the opening bell. The Zacks Consensus Estimate for the quarter to be reported is earnings of $1.18 per share on revenues of $34.15 billion.

The top U.S. automaker came up with better-than-expected results in the last reported quarter on the back of higher-than-expected profits from the North American segment. As far as earnings surprises are concerned, the company displays an excellent record of surpassing estimates in each of the trailing four quarters, with the average being 27.66%.

Markedly, the company’s rival Ford (NYSE:F) — which is the No. 2 U.S. carmaker — delivered an earnings beat in third-quarter 2019 on the back of higher-than-anticipated automotive sales in North America, Middle East and Africa segments.

Investors are expecting General Motors to top earnings estimates this season as well. However, our model does not indicate an earnings for the company for the to-be-reported quarter.

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings per share has been downwardly revised by 15.1% to $1.18 in the past seven days. The estimated figure indicates a 36.8% decline from the year-ago reported earnings of $1.87 per share. The Zacks Consensus Estimate for revenues is pegged at $34,153 million, suggesting fall of 4.5% from the prior-year reported figure.

Factors Setting the Tone

High demand of special vehicles like trucks and SUVs is likely to reflect positively on General Motors’ third-quarter 2019 results.The firm’s impressive crossover lineup and all-new full-size pickups are likely to have aided the company’s top line. Notably, General Motors’ U.S. sales in the third quarter increased 6.3% from the prior-year period to 738,638 deliveries. The company reported increased sales across all leading brands including Chevrolet, Buick, GMC and Cadillac.

While higher year-over-year vehicle sales in North America are likely to have buoyed the firm’s earnings, General Motors is expected to have suffered due to sagging vehicle sales in China amid economic slowdown and trade tussle. Evidently, the Zacks Consensus Estimate for vehicle sales in the International segment is pegged at 280,000 units for the to-be-reported quarter, indicating a decline from 289,000 reported in the year-ago period.

Notably, the consensus estimate for net sales for General Motors’ Financial segment is pegged at $3,608 million, suggesting 2.5% year-over-year improvement. Therefore, while increasing sales from GMNA (General Motors North America) and GM Financial segments are likely to have aided the firm’s earnings, weak performance of GMI (General Motors International) units may have dented overall results for the to-be-reported quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for General Motors in the quarter to be reported. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%.

Zacks Rank: General Motors currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Here are some companies from the same space, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

CF Industries Holdings, Inc. (NYSE:F) has an Earnings ESP of +7.56% and carries a Zacks Rank #2. The company is set to release third-quarter earnings on Oct 30.

Garrett Motion Inc. (NYSE:GTX) has an Earnings ESP of +7.66% and is a Zacks #3 Ranked player. The company is anticipated to release third-quarter 2019 earnings on Oct 29.

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