Markets

Will General Motors (GM) Beat Estimates in Q1 Earnings?

General Motors CompanyGM is set to report first-quarter 2017 results before the opening bell on Apr 28. In the last quarter, the company posted a positive earnings surprise of 12.28%.

Let's see how things are shaping up for this announcement.

Why is a Beat Likely?

Our proven model shows that General Motors has the right combination of two key ingredients to surprise earnings as 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.

Zacks ESP: General Motors' Earnings ESP is pegged at +0.69% as the Most Accurate estimate stands at $1.46, higher than the Zacks Consensus Estimate of $1.45. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: General Motors carries a Zacks Rank #3.

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

The combination of General Motors' Zacks Rank #3 and ESP of +0.69% makes us reasonably confident of an earnings beat on Apr 28.

General Motors Company Price and EPS Surprise

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

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.

General Motors expects 2017 adjusted earnings per share in the range of $6.00-$6.50, the mid-point of which is higher than the 2016 figure of $6.12. The automaker also expects adjusted EBIT and adjusted EBIT margin to remain stable or improve, while revenues are projected to rise from 2016. The automaker is also expected to generate around $6 billion of adjusted automotive free cash flow. The upbeat outlook is based on strong performance in North America and China along with growth in the GM Financial business. The company also expects to benefit from cost efficiencies, improvement in South America and benefits of a strong product launch strategy.

Moreover, General Motors recorded a 1.9% increase in vehicles sales in the U.S. to 0.55 million units in first-quarter 2017. This is expected to support the upcoming results. While sales in China declined 24% year over year in Jan 2017, February and March saw 0.4% and 16% higher sales, respectively.

However, General Motors has been recalling vehicles in large numbers. Product recalls increase the company's cost burden. Moreover, the company was forced to scale down or shut its manufacturing operations in some regions due to production constraints such as high costs and unfavorable currency translation effects.

Price Performance

General Motors underperformed the Zacks categorized Automotive-Domestic industry over the last three months. Share price of the company decreased 9.4% over a year while the industry saw a 0.2% decline. The share price was affected by decreased vehicles sales figures for the U.S. in 2016 and a large number of recalls.

Other Stocks that Warrant a Look

Here are some other 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:

CNH Industrial N.V. CNHI has an Earnings ESP of +33.33% and a Zacks Rank #2. The company is expected to report first-quarter 2017 results on Apr 27. You can see the complete list of today's Zacks #1 Rank stocks here.

Autoliv Inc. ALV has an Earnings ESP of +1.97% and a Zacks Rank #3. The company's first-quarter 2017 financial results are scheduled for release on Apr 28.

Delphi Automotive PLC DLPH has an Earnings ESP of +2.06% and a Zacks Rank #2. The company is scheduled to report first-quarter 2017 financial numbers on May 3.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

General Motors Company (GM): Free Stock Analysis Report

CNH Industrial N.V. (CNHI): Free Stock Analysis Report

Autoliv, Inc. (ALV): Free Stock Analysis Report

Delphi Automotive PLC (DLPH): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

ALV CNHI GM

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More