General Motors Misses Consensus As Sales Volume Falls In Q1 2019

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General Motors (NYSE: GM), the American auto manufacturer, announced its Q1 2019 results on April 30, 2019, followed by a conference call with analysts. The company missed consensus for revenue which was recorded at $34.9 billion, down by 3.4% year on year. The decrease was driven largely by full-size SUV production downtime, and reduced volumes in China. The earnings beat consensus and was recorded at $1.48, higher than the $1.43 per share in the same period of 2018.

 

General Motors reported $149.1 billion in Total Revenues in 2018. This included 4 revenue streams:

  • GM North America: $113.9 billion in 2018 (76.3% of Total Revenues). This includes income from automotive sales in the North America region.
  • GM International Operations: $19.2 billion in 2018 (12.9% of Total Revenues). This includes income from automotive sales of all regions globally sans North America and China.
  • GM China: $2 billion in 2018 (1.4% of Total Revenues). This includes income from automotive sales in China region.
  • Financial Services: $14 billion in 2018 (9.4% of Total Revenues). This includes revenue from the financial services provided for purchasing or leasing vehicles of the company.
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We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven General Motors’ Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Consumer Discretionary data.

 

Key Factors Affecting Earnings:

Revenue expected to fall slightly:

  • The revenue per quarter for General Motors increased at a steady pace in 2018. It increased from $36.1 billion in Q1 2018 to $38.4 billion in Q4 2018.
  • In Q1 2019 the revenue was recorded at $34.9 billion, down 3.4% year on year as they were impacted by full-size SUV production downtime, and reduced volumes in China.
  • The North America Segment is expected to go down a bit as the shrinking market would lower the volumes sold for the year. The expected revenue for 2019 is $110.9 billion.
  • GM’s International Operations are expected to grow a bit due to higher average revenue per vehicle. The expected Revenue for 2019 is $19.7 billion.
  • China is one of the biggest markets with huge potential across the world. GM is expected to continue increasing its market share and thus volume steadily across China. The expected Revenue for 2019 is $2.1 billion.

 

Trend in Expenses:

  • In the last few quarters the Total Expenses have moved largely in line with Revenue.
  • Cost of Sales for Automotive has mostly been just above 90% of Automotive Revenue in the past few quarters. In Q1 2019 it was at 90.3%.
  • Overall Gross Margin is expected to increase by approximately 180 basis points as GM also focuses on operational efficiency. Indirect Expenses are expected to rise steadily to around $18.6 billion in 2019.

 

Full Year Outlook:

  • For the full year, we expect gross revenue to decrease by 1% to $147.4 billion in 2019. Decrease in revenue is mostly expected from the North America region as the slowdown is expected to cause a drop in sales volume.
  • Gross Profit margin is expected to increase steadily toward, and reach around, 19.2%.

 

Trefis has a price estimate of $42 per share for General Motors’ stock. The value is based on the expectation that GM will consolidate its North America segment, and further work on improving the operational efficiency of their International operations.

 

 

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