General Motors (NYSE:GM) is set to report its Q2 earnings before market open on Thursday. YTD, GM stock is up over 21%, to help it significantly outperform the domestic auto manufacturing market’s 4% gain.
Overview & Fundamentals
Based in Detroit, General Motors is one of the largest automobile manufacturers in the world and is ranked 13th on the Fortune 500. General Motors sells its vehicles under a variety of brands, including Chevrolet, GMC, Buick, and Cadillac.
General Motors also owns significant parts of many foreign brands and does business internationally through wholly owned subsidiaries. The company operates through four main segments: North America, International, GM Financial, and GM Cruise. North America and International are made up of vehicle sales and operations.
Meanwhile, GM financial is a wholly owned subsidiary that offers finance and lease programs to customers and automotive dealers. GM Cruise is General Motors’ autonomous driving development company. Since 2017, Cruise has been offering its “Cruise Anywhere” program, which is an autonomous rideshare service in San Francisco—where the subsidiary is based.
Currently, GM is trading with a P/E of 6.49 which is significantly lower than its industry average of 9.94. This difference could mean that the stock is relatively undervalued at the moment. General Motors currently offers an annualized dividend of $1.52 per share for a yield of around 3.7%.
Q2 Outlook & Earnings Trends
Our Zacks Consensus Estimates call for Q2 revenue to fall 3.24% from the prior-year quarter to $35.57 billion. Since reaching an all-time high quarterly revenue of $40.48 billion in 2013, revenue has been on a gradual downtrend. Q1 continued the general downtrend, posting revenue of $48.78, falling over 9% year-over-year. The revenue prediction for Q2 would be above the revenue in Q1, but would still represent a 12% fall from the highs of 2013.
In the first quarter, North American vehicle sales fell by 52,000, with Chinese sales down over 170,000 against Q1 2018. The declines in these two massive markets accounted for the majority of GM’s decreased sales volume.
This trended is projected to continue both domestically and internationally, based on our Key Company Metrics. GM Financial is expected to post revenue growth to help offset some of the projected declines.
Looking at earnings, EPS is expected to fall by 20.99% to $1.43. Although this quarter’s EPS is significantly below last year’s Q2, fiscal 2019 is expected to be $6.58, compared to fiscal 2018’s EPS of $6.54. So, the decline in earnings this quarter will be made up for by year-over-year increases across the other three quarters.
Bottom Line
General Motors is not going anywhere anytime soon. With that being said, the company does need to find a way to boost its sales volume since Q1 saw year-over-year sales declines in every brand. GM’s autonomous driving program is clearly a unit that GM hopes will help the firm expand long-term, but the vehicle maker does need to find some other near-term winners as well.
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General Motors Company (GM): Free Stock Analysis Report
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