Through the first 11 months of 2017, deliveries of lucrative pickup trucks declined at General Motors (NYSE: GM). This was one of the few blemishes in what was otherwise a strong year for the top U.S. automaker. (Analysts expect GM to post record full-year earnings per share of $6.30 for 2017, up 3% year over year.)
Continue Reading Below
However, GM's pickup sales recovered in a huge way last month, with deliveries surpassing 100,000 units. This helped drive better-than-expected sales and extremely high average transaction prices (ATPs) at General Motors in December.
A slowdown for most of the year
As of the end of November, 2017 domestic deliveries were down by about 10,000 units year over year (or 1.2%) across GM's four pickup models: Chevy Silverado, Chevy Colorado, GMC Canyon, and GMC Sierra.
This stood in sharp contrast to the uptick in F-Series truck sales at crosstown rival Ford Motor (NYSE: F). For the same period, Ford reported a 10.1% surge in U.S. F-Series truck deliveries. In fact, F-Series deliveries nearly equaled the combined sales of all four GM pickup models. In the full-size truck market specifically, Ford outpaced GM by a double-digit margin.
GM pickup sales bounce back
Continue Reading Below
In December, General Motors' pickup deliveries skyrocketed. The Silverado accounted for most of this growth, with deliveries up 24.7% compared to December 2016, reaching 67,676 units. Chevy's "Employee Discount for Everyone" program probably contributed to this strong increase.
Including all four GM pickup models, monthly deliveries rose 17.8% year over year, from 91,041 units to 107,205 units. This was particularly impressive because there was one fewer selling day in December 2017 compared to December 2016.
Ford's F-Series trucks also had a solid month, with 89,385 deliveries in the U.S. However, this was up just 2.1% year over year. Furthermore, GM outsold Ford in the full-size truck market by nearly 5,000 units during December, reversing the trend that held for most of 2017.
The benefits of strong truck sales
The General's stellar pickup sales allowed it to smash through analysts' sales expectations last month. For example, Kelley Blue Book estimated that GM's December U.S. deliveries declined 7.9% year over year; Edmunds.com predicted a more moderate 5.8% decline. Both figures were roughly in line with the industry's projected performance.
Instead, deliveries slipped just 3.3% year over year at General Motors last month. Furthermore, most of that decrease related to a planned 40% reduction in less-profitable sales to rental car companies. Retail sales actually rose 1.8% year over year in December, while commercial and government deliveries posted a combined 7% increase.
Furthermore, the big uptick in pickup sales drove another strong increase in ATPs, despite GM's fairly aggressive discounting activity. A month ago, General Motors reported that ATPs had surpassed $37,000 for the first time in any month during November. That record didn't last long: ATPs surged past $38,000 in December, up from $36,386 a year earlier.
Finally, the strong December sales performance allowed General Motors to significantly improve its U.S. inventory position. GM ended the year with 752,554 vehicles in inventory in the U.S. -- slightly below the company's target, and down from 844,942 at the end of 2016.
Together, these factors bode well for GM's performance in 2018. With lean inventories to start the year, another modest decline in industry sales shouldn't impact GM's production very much. Furthermore, higher ATPs provide an alternative source of revenue and profit growth. As a result, General Motors is well positioned to deliver another record EPS performance this year.
10 stocks we like better than General Motors
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and General Motors wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of January 2, 2018