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Will General Motors (GM) Miss Earnings this Season? - Analyst Blog

General Motors Co. ( GM ) is set to report third-quarter 2014 results on Oct 23. Last quarter, it posted a surprise of -25.5%. Let's see how things are shaping up for this announcement.

Factors to Consider

General Motors's global sales in the third quarter of 2014 rose 2% year over year to 2,449,595 vehicles. The improvement was driven by the company's upbeat performance in China and U.S. together with improved market traction of the Opel brand and launch of vehicles.

However, General Motors has been facing the brunt of a delayed recall involving 2.6 million vehicles with defective ignition switches. The company has increased the approved death claims associated with the recall to 27 with apprehensions of a further rise. Kenneth Feinberg, who was hired by the company to assess death claims and deploy funds, stated that nearly 151 other fatality claims are presently under review. Consequently, General Motors is anticipating incurring costs of around $0.4-$0.6 billion. However, the expenses can scale even higher.

In addition, General Motors has been recalling vehicles in large numbers. The automaker has announced 75 recalls covering about 30 million vehicles in only North America so far this year. Owing to the series of recalls made, the company recorded a $2.5 billion charge for recall-related repairs in the first half of 2014.

Earnings Whispers?

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

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. General Motors' Most Accurate estimate stands at 93 cents while the Zacks Consensus Estimate is pegged at 96 cents. Hence, the difference stands at -3.13% for the company.

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

Stocks to Consider

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

PACCAR Inc. ( PCAR ) has an earnings ESP of +1.04% and a Zacks Rank #3 (Hold). PACCAR will be reporting third-quarter 2014 earnings on Oct 28.

Meritor, Inc. ( MTOR ) has an earnings ESP of +37.5% and a Zacks Rank #3. The company will be announcing third-quarter numbers on Nov 12.

Advance Auto Parts Inc. ( AAP ) has an earnings ESP of +0.54% and a Zacks Rank #2 (Buy). The company's third-quarter financial results are scheduled to release on Nov 6.

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PACCAR INC (PCAR): Free Stock Analysis Report

ADVANCE AUTO PT (AAP): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

MERITOR INC (MTOR): Free Stock Analysis Report

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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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