On January 3, we maintained our Neutral recommendation on
General Motors Company
) despite its lower earnings in 2012 third quarter based on
anticipated gain from the company’s major expansion plan across
the globe and its recent move to improve its brand image.
GM posted a 9.7% fall in earnings to 93 cents per share
(excluding special items) in the third quarter of 2012 from $1.03
in the corresponding quarter a year ago. However, earnings per
share far exceeded the Zacks Consensus Estimate by 32 cents.
The decline in earnings was attributable to lower profits from
North America and increased loss in Europe. Revenues in the
quarter grew 2.5% to $37.6 billion, surpassing the Zacks
Consensus Estimate of $36.3 billion.
Following the release of third quarter results, the Zacks
Consensus Estimate for 2012 went up by a penny or a meager 0.3%
to $3.26 per share. The Zacks Consensus Estimate for 2013 also
raised a tad 1.0% to $3.91. With the Zacks Consensus Estimates
for both 2012 and 2013 remaining almost flat, the company now has
a Zacks #3 Rank (Hold).
GM expects to benefit from its continued focus on emerging
markets, particularly in Asia. The leading global automotive
company announced plans to expand its dealerships in Indonesia
and Thailand. It also opened a plant in China through its joint
venture SAIC-GM-Wuling and upped stake in its Indian joint
venture with Shanghai Automotive Industry Corporation (SAIC).
Further, GM is very close to shedding its “Government Motors” tag
as it announced plans to repurchase 200 million shares from the
U.S. government for $5.5 billion. Post-sale, the stake of U.S.
Treasury in the company will be reduced to 19% from 26.5%.
However, the ongoing financial crisis in Europe is expected to
continue to mar the company’s results. Its European arm, Opel,
revealed that it expects to report an operating loss of €1
billion ($1.3 billion) in 2012 due to fewer than anticipated car
Other Stocks to Look For
Most of the top peers of GM are currently performing in the same
line. They include
Ford Motor Co.
Tesla Motors, Inc.
). Both of these companies carry a Zacks #3 Rank (Hold).