What To Expect From General Motors’ Second-Quarter Results

by Trefis Team
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General Motors (NYSE: GM) will release its second quarter results and conduct a conference call with analysts on 25th July 2018. The company is expected to post relatively flat results in comparison to the same period last year, with an estimated average consensus EPS (Non-GAAP) of $1.87 and revenue of $37.03 billion vis-à-vis an EPS (Non-GAAP) of $1.89 and a revenue of $36.98 billion reported a year ago. Overall, a strong growth in the U.S. market is expected to enhance the company’s revenue growth, however, a weaker performance in the Chinese market is expected to dampen the company’s overall performance.

GM reported strong results for its U.S. operations in the second quarter, with volume sales up by 4.6% year-on-year (y-o-y).   The company in its latest sales release notified that a strong U.S. economy coupled with a higher take-home individual pay with the implementation of the latest tax reform has led to an increase in the consumer demand for automobiles in the U.S. market. This increase was largely led by an increase in sales of pickups, large vans, and SUVs, which altogether displayed a y-o-y growth rate of 18% in the second quarter. A higher proportionate sale of more expensive and higher margin pickups, large vans, and SUVs is, in turn, expected to aid the company’s top line and bottom line growth. As a consequence of the same, GM stated that its average transaction price (ATP) per vehicle increased by about $300 y-o-y in the second quarter, through the strength of sales of new crossovers such as the Chevrolet Traverse and Buick Enclave.

GM’s sales in China, however, remained relatively flat in the second quarter. Sales grew marginally by 0.7% in the second quarter, even though the Chinese sales volume throughout the second quarter has remained strong. As per the data released by the China Association of Automobile Manufacturers (CAAM), automobiles sales in China displayed a y-o-y growth rate of 11.5%, 9.6%, and 4.8% in April, May, and June, respectively. GM’s decline in Chinese sales volume was largely due to a 16% decline in sales of its popular Buick brand. This decline was attributed to a technological changeover associated with the brand and is likely to revert in the coming quarters. GM has plans to introduce 10 new and refreshed models in the second half of the year, to keep up with the consumer preference in the Chinese market. However, relatively poor performance in the second-quarter is expected to pull down the company’s overall results.

Cost headwinds are not expected to considerably hurt the company’s performance in the second-quarter. The company remains relatively protected from the rising raw material costs, through long-term supply contracts and its cost performance initiatives. Overall, the company is expected to have a moderate quarter. Our key expectations from the company’s full-year performance are highlighted in our interactive dashboard analysis. You can modify our assumptions to arrive at your own fair price estimate for the company.

 

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