GM Earnings Can’t Ease Worries on Rising Costs
GM reported second-quarter earnings and revenues this morning that were better than expected, but investors did not like what they heard about rising costs and lowered EPS guidance.
When General Motors Co. (NYSE: GM) reported second-quarter 2018 results before markets opened Wednesday morning, the automaker posted adjusted diluted earnings per share (EPS) of $1.81 on revenues of $36.76 billion. In the same period a year ago, the company reported EPS of $1.89 on revenues of $36.98 billion. Second-quarter results also compare to the consensus estimates for EPS of $1.78 and $36.73 billion in revenues.
Net income for the quarter totaled $2.39 billion, up from $1.66 billion in the year-ago quarter. Adjusted pretax (EBIT) earnings totaled $3.19 billion, down from $3.68 billion a year ago. The company said rising commodity costs along with unfavorable currency exchange rates with Argentina and Brazil have had — and will continue to have — a negative effect on the business.
Total automotive revenues came to $33.31 billion in the quarter, down about 2% from $34 billion in the second quarter of last year. International sales were down 13.7% year over year, and North American sales were up about 0.2%.
GM reported U.S. sales volume of more than 758,000 vehicles in the quarter, up 4.6% year over year. Sales in China totaled more than 858,000 units, pushing first-half sales up 4.4%.
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Mary Barra, the company’s CEO, said:
We faced significant external challenges, but delivered solid results this quarter. The fundamentals of our business are strong and we remain focused on our plan – delivering great vehicles, developing technologies to transform personal mobility and creating long-term shareholder value.
The company revised previous guidance based on meaningful increases in commodity costs and foreign exchange rates. GM now expects adjusted EPS of about $6.00 and operating cash flow of about $11.5 billion. Consensus estimates call for third-quarter EPS of $1.62 and revenues of $35.88 billion. For the full year, analysts are looking for EPS of $6.41 and revenues of $145.98 billion.
GM’s shares traded down about 6.7% early Wednesday, at $36.91 in a 52-week range of $34.50 to $46.76. The 12-month price target for the shares was $49.39 before this morning’s report.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
