General Motors Company (NYSE: GM) stock dropped more than 5 percent on Wednesday after the auto giant reported second-quarter earnings and slashed its full-year guidance. Despite a difficult environment for GM in the near-term, analysts still say the company is well-positioned for long-term investors.
GM reported second-quarter adjusted earnings per share of $1.81 on revenue of $36.76 billion. Both numbers topped consensus analyst estimates of $1.78 and $36.73 billion, respectively. Revenue was down 0.6 percent from a year ago.
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Investors focused on GM’s full-year guidance cut. GM lowered its 2018 EPS outlook from $6.41 to $6. GM also says it now expects full-year adjusted auto free cash flow of $4 billion.
General Motors cited rising commodity costs and unfavorable foreign exchange rates as cause for its guidance cut and says it expects these headwinds to continue throughout the second half of the year.
“We faced significant external challenges, but delivered solid results this quarter,” CEO Mary Barra says in a statement.
Even without the guidance cut, GM investors were likely not impressed by the direction the company’s numbers have been trending. Net income was down 2.8 percent to $2.4 billion, and auto operating cash flow was down 24 percent to $4 billion.
While GM is struggling with what could be a cyclical downturn in the auto market, the company appears to be performing relatively well compared to its peers. GM’s second-quarter U.S. vehicle deliveries were up 4.6 percent to 758,000 compared to an industry increase of 2.2 percent. GM also reported that its U.S. market share increased by 0.4 percent on the strength of truck, SUV and crossover sales.
Bank of America analyst John Murphy says GM is still well-positioned for the long term.
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“Despite a more challenging macro environment, we continue to believe that GM’s core business is well managed, while the company continues to take decisive action on addressing underperforming segments, which is encouraging,” Murphy says. “At the same time, we continue to believe that GM is one of the best-positioned companies longer term, as its autonomous EV ride-sharing fleet efforts, combined with the overlay of OnStar, puts GM in a unique and strong competitive position.”
Bank of America has a “buy” rating and $60 price target for GM stock.
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General Motors Company (GM) Stock Slips Following Guidance Cut originally appeared on usnews.com
