General Motors Company (GM) Stock Rises After Earnings Beat

General Motors Company (NYSE: GM) stock gained 9 percent on Wednesday after the company reported a third-quarter earnings beat fueled by higher auto prices. Analysts say GM is in a better competitive position than critics realize and GM stock offers long-term investors a compelling value.

GM reported third-quarter adjusted earnings per share of $1.87 on revenue of $35.79 billion. Both numbers topped consensus analyst estimates of $1.25 and $34.85 billion, respectively. Revenue was up 6 percent from a year ago.

[See: A Look Into the Future for 7 Top Auto Stocks.]

GM said the launch of full-sized pickups and the performance of the Cadillac XT4 were particularly impressive in the third quarter.

Despite the strong top- and bottom-line numbers, GM acknowledged that it is still dealing with a difficult auto market. GM reported 1.976 million global deliveries in the third quarter, down from 2.236 million a year ago. U.S. deliveries dropped from 781,000 to 695,000.

GM’s market share also declined from 17.3 to 15.8 percent in the U.S. and from 11.8 to 10.8 percent worldwide.

However, General Motors was able to offset declining deliveries and market share by leveraging higher prices. North American margin increased from 8.3 to 10.2 percent thanks to an $800 uptick in average transaction price. GM’s North American ATP climbed to a record $36,069, about $4,000 above the industry average.

“Our disciplined approach to the U.S. market, combined with strength in China and further growth of GM Financial, drove a very strong quarter,” CFO Dhivya Suryadevara says in a statement.

Looking ahead, GM reiterated its full-year EPS guidance of between $5.80 and $6.20.

[See: The 10 Most Valuable Auto Companies in the World.]

Bank of America analyst John Murphy says both North American and international income exceeded his expectations, and the performance of GM Financial was a bright spot as well.

“In total,this was another solid quarter, driven largely by execution in the core business while investing for the future,” Murphy says. “Given the strong 3Q results and the reiteration of the 2018 outlook (which may even have some upside), we continue to believe that GM is one of the best-positioned companies near and longer term, and its future tech portfolio provides substantial upside optionality to the stock.”

Bank of America has a “buy” rating and $60 price target for GM stock.

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