General Motors Can Drive To $26 With Strong Earnings Thursday

by Trefis Team
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General Motors (NYSE:GM) will release its first quarter earnings on Thursday. We expect the company to build on its record breaking performance last year due to strong vehicles sales, the rapid adoption of its fuel efficient car line and sales gains in China. However investments in production capacity to bring new models to the market could add to expenses, which we be a factor to watch.General Motors competes globally with automakers like BMW (GR:BMW), Ford (NYSE:F),Daimler(ETR:DAI), Audi (NSU:GR), Honda (NYSE:HMC), Toyota (NYSE:TM) and others.

We currently have a Trefis price estimate of $26 for General Motors’s stock, which is more than 20% above the current market price.

See our complete analysis for General Motor’s stock

China sales to lead results gain

General Motors continued to perform exceptionally well in China, its largest market, despite a slow down in the overall Chinese auto industry. The company managed to sell 745,152 vehicles in China in the first quarter of 2012, a growth rate of 8.7 percent from the corresponding previous year quarter.

Its March sales, totaling 257,944 were the second highest in any month since the company has started doing business in China. Sales were mainly driven by GM’s new models like Chevrolet Malibu which complemented its established line up of products such as Buick Excelle, Chevrolet Cruze and Cadillac SRX.

Chevrolet continues to be in the driving seat

Chevrolet continues to be the star performer for the company, outpacing the automotive industry’s growth since 2009. In the last quarter, Chevrolet sold 1.18 million vehicles worldwide, an increase of 6.5 percent over the first quarter of 2011. This increase was spread through all of the important markets for General Motors.

In the U.S., the company recorded a 7.6% sales growth as demand for fuel-efficient vehicles like the Cruze, Malibu and Sonic increased. Argentina, Mexico and China were the other growth markets for the, recording sales growth of 21.5%, 14.2% and 4.2% respectively. The Chevrolet Cruze was the most successful model for the company, clocking sales of 180,000 in the last quarter while recently launched brands like 2012 Aveo/Sonic small car and 2013 Malibu mid-size sedan picked up sales as more units became available with the dealers.

Impressive performance by General Motor’s fuel efficient cars

The performance of General Motor’s fuel efficient car lineup was one of the main highlights for the company last quarter. Its portfolio of 12 cars which have 30 miles or better per gallon, as certified by EPA, saw sales of over 100,000 units in March. This sales increase was mainly driven by customer’s appreciation of the benefits derived from the company’s advancement in areas such as four-cylinder and turbocharged engines, advanced transmissions and vehicle electrification.

General Motors has grown the share of its vehicle sales, achieving mpg (miles per gallon) of over 30, from 16% to 40% in the past three years. This trend is expected to continue as General Motor’s new fuel-economy vehicles like Chevrolet Spark, Cadillac ATS and the Buick Encore are expected to hit the market by the end of 2012.

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