GM Misses, Yearly Profits Fall - Analyst Blog

By Zacks | February 14, 2013 AAA

General Motors Company (GM) posted a rise in profits to $0.8 billion or 48 cents per share in the fourth quarter of 2012, missing the Zacks Consensus Estimate by a penny, compared with $0.7 billion or 39 cents in the same quarter of 2011. The results excluded net gain from special items of $0.1 billion or 6 cents in the 2012-quarter and net loss from special items of $0.2 billion, or 11 cents in the 2011-quarter.

Revenues in the quarter scaled up 3.4% to $39.3 billion, which was higher than the Zacks Consensus Estimate of $38.6 billion. Unit sales escalated 4.2% to 2.3 million vehicles. The automaker occupied a market share of 11.5% during the quarter, down from 11.6% in the year-ago quarter.

Adjusted earnings before interest and tax (EBIT) was $1.2 billion in the quarter compared with $1.1 billion in the fourth quarter of 2011. Adjusted EBIT included the impact of restructuring charges of $(0.2) billion.

Segment Results

GM North America (GMNA) generated revenues of $24.2 billion during the quarter, a 4.6% rise from the year-ago level. Adjusted EBIT decreased to $1.4 billion from $1.5 billion in the fourth quarter of 2010.

GM Europe (GME) had revenues of $5.6 billion, an 11.1% decrease from the previous year quarter. The segment reported a higher adjusted loss of $0.7 billion in the quarter, compared with $0.6 billion a year ago.

GM International Operations (GMIO) generated revenues of $7.9 billion, up 12.9% from the prior year. Adjusted EBIT was $0.5 billion in the quarter compared with $0.4 billion in the comparable quarter of 2011.

GM South America (GMSA) had revenues of $4.5 billion, a 6.9% increase from the prior-year quarter. The segment had an adjusted EBIT of $0.1 billion in the quarter compared with an adjusted loss of $0.2 billion in the fourth quarter of 2011.

Meanwhile, GM Financial reported an impressive 34.3% rise in revenues to $529 million during the quarter. The segment recorded a lower adjusted EBIT of $0.1 billion compared with $0.2 billion in the 2011-quarter.

Annual Results

For full year 2012, GM posted a 15.6% fall in profits to $5.4 billion or $3.24 per share, from $6.4 billion or $3.88 in 2011. It was in line with the Zacks Consensus Estimate. The results excluded unfavorable impact of $0.5 billion or 32 cents in 2012 and a favorable impact $1.2 billion or 70 cents in 2011.

Revenue increased marginally by 1.3% to $152.3 billion from $150.3 billion in 2011. It was higher than the Zacks Consensus Estimate of $151.1 billion. Unit sales escalated 2.9% to 9.3 million vehicles from 9.0 million vehicles in 2011.

Adjusted EBIT in the year went down to $7.9 billion from $8.3 billion in 2011. The automaker's global market share during the year deteriorated to 11.5% from 11.9% in 2011.

Financial Position

GM had cash and cash equivalents of $18.4 billion as of Dec 31, 2012, up from $16.1 billion at the end of 2011. Total debt increased to $16.0 billion as of Dec 31, 2012 from $13.8 billion as of Dec 31, 2011. This led to higher debt-to-capitalization ratio of 30.7% as of Dec 31, 2012 compared with 26.6% as of Dec 31, 2011.

In 2012, the company had cash flow of $9.6 billion from operating activities, up from $7.4 billion a year ago. Meanwhile, capital expenditures rose to $8.1 billion from $6.2 billion in 2011. This translated into free cash flow of $1.6 billion in 2012, up from $1.2 billion in 2011.

Outlook

GM expects to boost its top-line in 2013 with the help of new vehicle launches. At the same time, the company believes cost control measures will boost its bottom line growth. It expects 2013 capital expenditures to be at the 2012-level.

Our Take

GM is a leading global automotive company. The company has presence in almost 120 countries and has facilities located in 30 countries. It currently retains a Zacks Rank #3 (Hold).

Few stocks that are performing well in the industry where GM operates include Oshkosh Corporation (OSK) and Commercial Vehicle Group Inc. (CVGI), and Strattec Security (STRT). They carry a Zacks Rank #1 (Strong Buy).

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