On Mar 2, 2014, we issued an updated research report on
General Motors Company
). General Motors benefits from its focus on the emerging
markets, investments in North America and efforts to boost
financial flexibility. We also appreciate its focus on the fuel
However, we are concerned about its significant exposure to
Europe, rising debt and declining free cash flow. Additionally,
high product recalls and the ongoing investigation regarding
delay in product recalls are reasons for concern.
General Motors recorded adjusted earnings of $1.1 billion or
67 cents per share in the fourth quarter of 2013, lagging the
Zacks Consensus Estimate of 88 cents per share. In comparison,
the company generated earnings of $0.8 billion or 48 cents per
share in the fourth quarter of 2012.
Revenues in the quarter grew 3.1% year over year to $40.5
billion, lagging the Zacks Consensus Estimate of $40.8 billion.
In 2013, General Motors was the leading automaker with a 16.9%
market share in the U.S. GM is focusing on the emerging markets,
particularly Brazil, China and India, to recoup its global sales
by increasing capacity investment to meet the growing demand.
However, General Motors has been facing heat for delaying the
recall of 1.6 million vehicles with defective ignition switches
which can lead to shutting down of the engine and prevent
deployment of front air bags in the event of a crash.
GM's total debt (Automotive and Financial) increased
significantly to $36.2 billion as of Dec 31, 2013 from $16.1
billion as of Dec 31, 2012. Consequently, debt-to-capitalization
ratio increased to 45.9% as of Dec 31, 2013 from 30.7% at the end
General Motors reported positive earnings surprises in 3 of
the trailing 4 quarters with an average beat of 2.95%. The Zacks
Consensus Estimate for the company's 2014 earnings per share
stands at $3.77, up 18.52% from 2013.
General Motors currently holds a Zacks Rank #4 (Sell). Some
better-ranked automobile stocks worth considering are
Tata Motors Limited
Tesla Motors, Inc.
). Tata Motors and Dailmer sport a Zacks Rank #1 (Strong Buy),
while Telsa carries a Zacks Rank #2 (Buy).
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