GM earnings under pressure as sales cool off
General Motors is bullish on 2018, but a weaker market for new cars is expected to weigh on the automaker’s bottom line for the first quarter.
The Detroit-based company has said its 2018 financial results will be “largely in line” with last year’s earnings, and profits are on pace to grow in 2019, as GM benefits from strength in North America and China and the launch of redesigned Chevrolet and GMC pickup trucks later this year.
In the first quarter, a slow start to U.S. sales may contribute to a decline in profits for GM. The company saw tepid sales in January and February, while sales bounced back in March. Overall, sales grew 3.8% during the opening quarter of 2018. GM could see an earnings boost after selling a larger share of trucks and SUVs, two lucrative segments. Seventy-nine percent of all vehicles GM sold during the period were trucks or SUVs, an increase from about 72% a year earlier.
Analysts expect GM to earn an adjusted profit of $1.24 a share, down from $1.70 a share. Forecasts call for revenue of $34.7 billion compared to $41.2 billion in the first quarter of 2017.
Rising costs are also a potential factor. GM has warned that higher commodities expenses will be a headwind this year, though not as much as some of its rivals. Manufacturers have recently noted higher steel prices following President Donald Trump’s decision to impose tariffs on imports.
Investors will also be watching GM’s earnings report for details on international restructuring, particularly in South Korea, and the company’s vision for Cadillac.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GM | GENERAL MOTORS CO. | 45.06 | +0.20 | +0.45% |
| F | FORD MOTOR CO. | 12.50 | +0.07 | +0.56% |
| FCAU | n.a. | n.a. | n.a. | n.a. |
The luxury brand’s president, Johan de Nysschen, abruptly left the company last week amid lagging sales. Morgan Stanley analysts saw the leadership change as a positive development, saying Cadillac is highly valuable and hasn’t lived up to its potential.
Shares of General Motors have gained 11.8% over the past 12 months, while Ford has dropped 4.1%.