We have upgraded our long-term recommendation on
General Motors Company
) to Neutral. The largest automobile manufacturer in the world and
one of the 'Big Three' U.S. automakers benefits from its focus on
the emerging markets and expects further improvement from its
expansion across the globe.
General Motors is expanding its footprint in the emerging global
markets including Brazil, China and India. The company expects its
global expansion strategy to enhance its sales and meet the rising
General Motors has increased its U.S. light vehicle sales
expectation for 2012 to 14 million-14.5 million units from prior
guidance of 13.5 million-14 million units, based on the improved
macroeconomic conditions in U.S. and pent-up demand in the
automotive sector. Further, the launch of 20 major vehicles across
the globe in 2012 will boost the company's unit sales and revenues.
However, the company faces challenges from the ongoing financial
crisis in the euro zone. Its European operation Opel expects to
incur an operating loss of €1 billion ($1.3 billion) in 2012 due to
fewer-than-anticipated car sales.
General Motors, in the second quarter of 2012, registered a 41%
decline in its profit to $1.49 billion or 90 cents per share from
$2.52 billion or $1.54 in the corresponding quarter of 2011.
Nevertheless, the earnings per share exceeded the Zacks Consensus
Estimate by 15 cents.
Total revenues fell 4.5% year over year to $37.60 billion in the
quarter, missing the Zacks Consensus Estimate of $37.98 billion.
The decline in the profit and revenues was attributable to
strengthening of the U.S. dollar against most of the major
currencies as well as weak macroeconomic conditions globally,
especially in Europe and South America.
Ford Motor Co.
), one of the major competitors of General Motors, also expects to
incur losses between $500 million and $600 million in 2012 in the
19 European markets, owing to the ongoing debt crisis in the
Our recommendation on General Motors is backed by a Zacks #3 Rank,
which translates into a short-term (1 to 3 months) Hold rating.
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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