Earnings Preview: General Motors Company Looks Set for a Strong First Quarter

A strong increase in Chevy Silverado sales is expected to boost GM's first-quarter bottom line. Source: General Motors Co.

Investors, start your engines! General Motors is gearing up to report its earnings for the first quarter of 2015 before the bell on Thursday.

What analysts are saying:

Buy or sell? Thompson/First Call tracks 16 analysts covering the General. 11 say it's a buy while 5 say hold.

Earnings? They say GM will earn $0.96 a share in Q1, a nice boost from the $0.29 it reported a year ago, when hefty recall costs took a big bite out of its bottom line.

What management saysGM is making big investments for big growth -- but the fruits of those investments are mostly a few years away. GM expects to have 10% margins in North America (in 2016), to sell 500,000 high-profit Cadillacs a year (in 2020), to deliver almost 5 million vehicles in China (in 2018), and so on.

CEO Mary Barra and her senior team announced a long list of ambitious goals for GM last fall, goals that should reward patient investors over the next several years. Barra and CFO Chuck Stevens said last quarter that GM was on track to meet them, but it'll be a while before investors can enjoy the full effects.

But Barra and company are saying all the right things about being focused on business fundamentals -- something that eluded many of their predecessors. In the near term, GM has promised that earnings and margins will improve in all of its regional business units in 2015 over 2014. And last year's results were solid, aside from the hefty costs of GM's recall scandal.

What management doesGM's current leadership team has delivered pretty well on past guidance. Setting aside the (admittedly huge) costs of GM's recall mess last year, it has increased its margins in North America for six straight quarters. Q1 could increase that string to seven. That's important: North America is generating most of GM's profits right now while it invests in expansion and improvements overseas.

On a longer-term horizon, as noted above, GM is focusing its investments on high-profit and high-growth opportunities, while cutting its losses in underperforming businesses or areas of the world. Its stated goal is a 20 percent or better return on invested capital -- which will in turn drive bigger returns to shareholders.

What this Fool saysFor years, GM over-promised and under-delivered. Barra seems determined to reverse that -- and a little over a year into her tenure, there's a growing list of reasons to believe that she's got GM on track.

For the first quarter, there will almost certainly be good progress to report. GM is working to reduce its longtime reliance on U.S. truck and SUV sales by making more money with Cadillac and in other parts of the world -- but right now, its U.S. truck and SUV sales have been great.

Sales of the full-size Chevrolet Silverado pickup rose 17.6% in the quarter, as GM's dealers were able to take good advantage of short supplies of rival Ford's all-new F-150. GM's big SUVs, which were new (and much improved) last spring, are also posting impressive gains: Chevy Tahoe sales rose 33%, the Suburban gained almost 77%, and sales of the (massively profitable) Cadillac Escalade more than doubled.

Overseas, GM should post a solid profit from its Chinese joint ventures. A loss in Europe is likely, but I expect GM to report continued progress toward a return to profitability in the next year or so. And I expect incremental progress with its efforts to expand GM Financial, and with Stevens' ongoing efforts to boost the General's already much-improved balance sheet.

The upshot: Look for North America margins close to 10%, more than $500 million in equity income from GM's China ventures, and narrowing losses in Europe -- and a per-share profit that is a little bit ahead of Wall Street's strong expectations.

The article Earnings Preview: General Motors Company Looks Set for a Strong First Quarter originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.