On May 9, we maintained our Neutral recommendation on
General Motors Company
), 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.
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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
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
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
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
Tower International, Inc.
). All the companies carry a Zacks Rank #1 (Strong Buy).