General Motors Co.’s (NYSE:GM) second-quarter profit beat analysts’ estimates as the largest U.S. automaker is poised for growth with the one of the biggest waves of new models in its history.
Profit excluding one-time items was 84 cents a share, GM said, exceeding the 77-cent average of 13 estimates compiled by Bloomberg. That compares with 90 cents a share a year earlier. GM rose 1.6% to $37.75 at 9:08 a.m. New York time before regular trading.
Demand for pickups in the U.S. as well as Cadillacs and Buicks in China boosted revenue 3.9%. The growth for GM, along with Ford Motor Co. and Chrysler Group LLC, is further evidence of the industry’s resurgence even after Detroit this month filed the largest municipal bankruptcy in U.S. history.
“We’re just at the very beginning of our new launch cycle here, a lot of the new product is yet to really come into the market at full run rate,” Chief Financial Officer Dan Ammann told reporters today at the company’s Detroit headquarters.
GM’s North American operations reported adjusted earnings before interest and taxes that rose 4.5% to $1.98 billion, the automaker said today in a statement. That exceeded the $1.73 billion average of three analysts’ estimates. Companywide net income fell 23% to $1.41 billion in the second quarter. The company earned $2.59 billion during the first six months.
Top Markets
“We continue to perform well in the world’s two most important markets, the U.S. and China,” Chief Executive Officer Dan Akerson said in the statement. “For the rest of the year, we’ll focus on winning customers with high-quality vehicles at a compelling value.”
The redesigned Chevrolet Corvette and Silverado are among 18 new or refreshed GM vehicles arriving in U.S. showrooms this year. The surge will transform GM’s lineup into one of the newest in the industry from one of the oldest. One of the earliest new offerings, the 2014 Impala, was rated by Consumer Reports today as the best sedan on the market -- a first for a U.S. automaker in at least 20 years.
“I’ve been telling clients for a long time that GM’s stock is cheap today partly because they’re not operating at their full potential,” David Whiston, an analyst with Morningstar Inc. in Chicago, said in a telephone interview.
CEO’s Targets
The product push is part of Akerson’s efforts to boost North American profit margins to 10%, stem European losses and increase China sales to 5 million, all by mid-decade.
GM’s European unit, which includes the Opel brand, narrowed to an adjusted loss before earnings and taxes of $110 million from $394 million a year earlier. That was an improvement from the first quarter when the unit lost $175 million.
The company’s international operations, which include China, India and other markets, adjusted Ebit fell 64% to $228 million from $627 million a year earlier.
The results were weakened by sales declines in markets such as India and by Japanese automakers’ use of the weak yen to pressure GM in ASEAN and Australian markets, Ammann said. GM’s China Ebit rose from a year earlier, he said.
In South America, GM’s operating profit more than tripled to $54 million from $16 million a year earlier, the company said.
Year-earlier regional results were revised as part of GM’s previously announced financial reporting change implemented during the first quarter, said Tom Henderson, a company spokesman.
Total revenue rose to $39.1 billion, beating the $38.57 billion average estimate of six analysts.
GM’s Pickups
While GM’s lineup may be old, it’s still making some of the best vehicles it has produced in a generation along with Ford and Fiat SpA-controlled Chrysler, helping all three gain U.S. market share during the first half for the first time in 20 years.
GM’s second-quarter performance in its home market was bolstered by sales of its old pickups.
Combined deliveries of the Silverado and the Sierra, the GMC brand equivalent, rose 26%. The average transaction prices of GM’s full-size pickups rose 5.3% to $36,641 during the quarter compared with a year earlier, according to Edmunds.com, a website that tracks auto sales. That trails Ford’s F-150, which averaged $38,841.
GM’s pickup growth was in line with the gain posted by Ford’s F-Series, the market’s top-selling line of vehicles. The high-volume F-150 is due for a redesign next year.
Ford’s Results
Ford yesterday reported second-quarter net income of $1.23 billion. Excluding some items, Ford’s per-share profit was 45 cents, exceeding the 37-cent average of 17 analysts surveyed by Bloomberg. Shares of the Dearborn, Michigan-based automaker closed at the highest level since January 2011.
Ford raised its full-year pretax profit forecast to equal or exceed last year’s $8 billion after earning $4.7 billion in the first half. The company had previously projected its annual result would be in line with last year’s. Ford also narrowed its loss forecast for Europe to about $1.8 billion from $2 billion. Its pretax loss in the region narrowed to $348 million from $404 million a year ago.
GM has predicted modest profit improvement this year because it doesn’t expect the new models to boost earnings until the second half.
Attractive Products
Goldman Sachs Group Inc. last week swapped GM for Ford on its Americas Conviction Buy list and projected that the largest U.S. automaker’s shares may rise to $45 in the next year from $37.14 at yesterday’s close. Patrick Archambault, a New York- based auto analyst for Goldman Sachs, said the new pickups will boost GM’s profit margins and that the automaker may pay a dividend by the end of the year.
“We see GM as one of the most attractive product stories in the sector,” he wrote.
The new Silverado Crew Cab began trickling into showrooms in May with plans for the double cab to arrive in the third quarter, followed by the regular cab a month to 45 days later, GM has said. It won’t be until the fourth quarter when GM is selling more of the 2014 models than 2013s.
Other new GM vehicles arriving in the fourth quarter include the redesigned Cadillac CTS sedan and refreshed Buick Regal car. The new Chevrolet Impala sedan began arriving in showrooms in the second quarter.
GM returned to the Standard & Poor’s 500 Index during the second quarter, a milestone triggered in part by the U.S. Treasury reducing its stake in the automaker. GM said in December that the U.S. planned to divest its holding within 15 months.
Shares on May 17 topped the $33 initial public offering price for the first time in two years, and a union retiree medical trust has begun selling its stock.
