On Jun 25, 2014, Zacks Investment Research downgraded
General Motors Company
) to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold).
Why the Downgrade?
General Motors has been facing extensive negative media coverage
recently over a spate of recalls as well a large fine. This has led
to downward estimate revisions over the last few months.
In the last 30 days alone, 4 out of 9 analysts covering the
stock reduced their earnings estimates for 2014. As a result, the
Zacks Consensus Estimate for General Motors' 2014 earnings per
share fell to $3.12 from $3.17 during this period. Moreover, this
estimate implies a 1.47% decline in earnings from 2013.
General Motors' recent earnings results have also been below
expectations. The company reported negative earnings surprises in
the last 2 quarters, while the average surprise over the last 4
quarters was a negative 3.57%.
General Motors has announced 44 recalls this year, covering over
20 million vehicles in North America alone. It will have to incur a
charge of $700 million in the second quarter of 2014 for repairing
the vehicles recalled during the quarter. It recorded a $1.3
billion charge for recall-related repairs in the first quarter.
Additionally, General Motors agreed to pay a fine of $35 million
to the U.S. safety regulators for the late recall of 2.6 million
cars with faulty ignition switches. Currently, this is the maximum
amount the government can fine a company.
General Motors is also facing many lawsuits and investigations
related to the issue, which also resulted in negative publicity.
Last week, a $10 billion lawsuit was filed against the company
demanding compensation for millions of its car and truck owners for
the loss of resale value of their vehicles. All these factors have
led to decline in shareholder value.
Other Stocks to Consider
Some better-ranked automobile stocks worth considering are
Dorman Products, Inc.
Standard Motor Products Inc.
Douglas Dynamics, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
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GENERAL MOTORS (GM): Free Stock Analysis Report
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