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General Motors (GM) Q4 Earnings: A Surprise in the Cards?

General Motors CompanyGM is set to report fourth-quarter 2016 and full-year results before the opening bell on Feb 7. In the last quarter, the company posted a positive earnings surprise of 19.44%. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

General Motors is striving to improve its results through the launch of new vehicles, expansion of business, reduction of costs and improved efficiency in core operations. In addition, the company is focused on investing in innovative technologies and vehicles, which should drive sustained growth. It has also adopted a comprehensive capital allocation strategy to return value to shareholders.

Based on the strong operating performance in the first nine months of 2016, General Motors projects full-year adjusted earnings per share close to the upper end of its $5.50-$6.00 guidance.

However, General Motors recorded a 1.3% decrease in vehicles sales in the U.S. to 3.04 million in 2016. This is expected to affect the results of the automaker. In addition, General Motors has been recalling vehicles in large numbers. Product recalls increase the company's cost burden.

Earnings Whispers

Our proven model does not conclusively show that General Motors is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for General Motors is -1.77% because the Most Accurate estimate is $1.11 while the Zacks Consensus Estimate is pegged at $1.13. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: General Motors carry a Zacks Rank #2 which increases the predictive power of ESP. However, the company's negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

General Motors Company Price and EPS Surprise

General Motors Company Price and EPS Surprise | General Motors Company Quote

Price Performance

General Motors underperformed the Zacks categorized Automotive-Domestic industry over the last three months. Share price of the company increased 14.6% over a year while the industry saw an 18.6% increase. The share price was affected by decreased vehicles sales figures for the U.S. in 2016 and a large number of recalls.

Stocks to Consider

Here are a few companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Cummins Inc. CMI , slated to report fourth-quarter and full-year 2016 results on Feb 9, has an Earnings ESP of +0.99% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Magna International Inc. MGA has an Earnings ESP of +0.74% and a Zacks Rank #3. The company's fourth-quarter and full-year 2016 financial results are expected to release on Feb 24.

American Axle & Manufacturing Holdings, Inc. AXL has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is expected to report fourth-quarter and full-year 2016 financial numbers on Feb 10.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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