General Motors Earnings: What To Watch For
General Motors (NYSE:GM) will announce its Q2 2017 earnings on July 25th 2017 and the consensus estimates for the company expect an EPS (earnings per share) of $1.70 (around 8% lower than the EPS of $1.86 for the same period last year) and revenues of $ 40.2 billion (5% lower than the revenue number of $42.37 billion for the same period last year). However, the company is expected to be on track to meet its EPS guidance of around $6- $6.50 for the year.
U.S. Outlook
The U.S. automotive industry in Q2 2017 has been softer compared to GM’s expectations. However, this weakness is in the areas where the company is de-emphasizing (primarily passenger cars) and hence is less likely to impact its long term growth. With a softer than expected SAAR (Seasonally Adjusted Annualized Rate) and planned launches in 2017, GM has a build-up of inventory as of June 2017. However, it remains committed to the year-end inventory targets.
For June 2017, the company’s U.S. sales were down about 3% compared to the same period last year, due to an industry wide pull back in daily rental sales. However, the company witnessed a 23% increase in crossover retail sales due to the strength of Chevrolet Equinox, which was up 36%. While rental vehicles sales in the U.S. have slowed down, the company expects the second half of 2017 to be stronger and U.S. economic fundamentals are positive to drive growth in the future.
China Revenues
GM’s sales in China have remained strong in Q2 2017. While April was a slow month with sales down 1.9% year on year, May and June have been stellar months for the company in China. The company and its joint ventures achieved their highest June sales ever, with a 4.3% increase on an annual basis. GM’s Buick, Cadillac, and Baojun brands showed strong results in June 2017 and the rising demand for SUVs in China have helped the company. As the company launches new and refreshed models in the region in the coming months, China will remain a strong growth driver for General Motors.
The Cadillac brand has remained a strong growth driver for GM, driving its global sales. The company is working on technology initiatives such as integrating the myCadillac mobile app with Apple Watch to allow owners quick access to various commands and vehicle to infrastructure (V2I) capability which would allow the vehicle to alert the driver of safety, mobility, or environment related conditions ahead. These initiatives indicate the company’s commitment to build futuristic vehicles which can give it a competitive edge.
For Q2 2017 we would be watching GM’s results for the impact of a softer industry environment and looking for its guidance for the rest of the year, given that the industry environment is likely to be strong for the remainder of the year.
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