North American Segment Drives General Motors (GM) Q3 Earnings

General Motors ( (NYSE:GM) ) delivered a comprehensive beatin the third quarter of 2019, with earnings and sales surpassing the Zacks Consensus Estimate. Better-than-expected performance from the North American market led to the outperformance. The company’s top peer, Ford (NYSE:F) also delivered earnings and sales beat in third-quarter 2019 due to strong North American market.

General Motors reported adjusted earnings of $1.72 per share in third-quarter 2019, topping the Zacks Consensus Estimate of $1.18. However, the bottom line declined 8% from the year-ago figure. The top U.S. carmaker firm reported revenues of $35,473 million, topping the Zacks Consensus Estimate of $34,153 million. However, the top line decreased from the year-ago figure of $35,791 million.

The automaker’s global market share was 10.7% in the reported quarter, reflecting a marginal decline from 10.8% in the year-ago period.

Segment Results

GM North America (GMNA) generated net sales and revenues of $27.9 billion in third-quarter 2019, up from $27.6 billion recorded in the corresponding period of 2018. Revenues from the GMNA unit also outpaced the Zacks Consensus Estimate of $25.7 billion. Profits from the segment recorded a year-over-year increase of 7% to $3 billion in the quarter under review. Moreover, the figure surpassed the Zacks Consensus Estimate of $2.5 billion. Robust sales of trucks and crossovers drove the results of the unit. Higher year-over-year pricing of all new pickups also aided the performance. Notably, vehicle sales in the United States came in at 739,000 units, reflecting a year-over-year increase of 6%. Deliveries increased across all its brands, with crossovers generating record sales in the quarter.

GM International’s (GMI) net sales and revenues were $3.8 billion, declining from $4.6 billion in the year-ago quarter. Revenues from the GMI segment also lagged the Zacks Consensus Estimate of $4.2 billion. The unit recorded an operating loss of $65 million against income of $139 million a year ago. The Zacks Consensus Estimate for segmental earnings was $112 million. Sagging vehicle sales in China amid economic slowdown and trade tussle negatively impacted the segment.

GM Financial generated net sales and revenues of $3.66 billion in the quarter under review, reflecting a rise from $3.51 billion recorded in the year-ago period. The segment recorded operating profit of $711 million, significantly beating the Zacks Consensus Estimate of $469 million. The figure also increased 42.7% year over year.

Dividend & Financials

General Motors recently declared fourth-quarter dividend of 38 cents a share, payable on Dec 19 to its shareholders as of Dec 6, 2019.

General Motors had cash and cash equivalents of $20.1 billion as of Sep 30, 2019 compared with $20.8 billion on Dec 31, 2018. Long term automotive debt stands at $13.1 billion.

Adjusted automotive free cash flow in the reported quarter was $3.8 billion, representing a massive increase from $396 million in the prior-year period.

Guidance

General Motors expects full-year capex to come in at $7.5 billion, lower than the prior projection. Amid the impact of UAW strike, the company has revised its full-year view. It now forecasts adjusted EPS between $4.50 and $4.80 per share. The company expects adjusted automotive free cash flow within $1 billion.

Zacks Rank & Key Picks

General Motors currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the auto space are Polaris Industries Inc. (NYSE:PII) and Tesla, Inc. (NASDAQ:TSLA) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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