General Motors Rises Above IPO Price - Analyst Blog

Shares of General Motors Company (GM) hit new 52-week high of $33.77 on May 17, which is above its previous level of $32.44 as well as the Initial Public Offering (IPO) price of $33.00 (held in Nov 2010) for the first time since May 4, 2011.

GM’s last closing price was $33.42, which represented a solid one-year return of 54.7% and year-to-date return of 14.7%. The world’s second largest automaker (by sales volume) has a market cap of $45.7 billion. Average volume of shares traded over the last three months stood at approximately 11,419.4K.

Shares of the company started escalating following its announcement of revival plan in Europe and U.S. Treasury department’s announcement of selling a significant stake in the company as well as improvements in the U.S. and Chinese markets.

Last month, Chairman and CEO of GM, Dan Akerson, promised to invest €4 billion ($5.2 billion) in its European operation Opel without revealing any plan to close down plants or other specific measures in order to boost earnings. Opel plans to launch 23 new models and 13 new engines within 2016 and develop a small car platform with French partner PSA Peugeot Citroen (PEUGY).

In the same month, the U.S. Treasury Department revealed that it sold $621 million worth of GM common stock in March, recovering $30.4 billion of the $49.5 billion bailout fund received by GM. The U.S. Treasury intends to sell the remaining 16% stake in GM early 2014. The rising stock price would definitely help the government recovering its bailout fund as much as possible.

GM reported a 28.0% fall in earnings to 67 cents per share in the first quarter of the year from 93 cents in the same quarter of 2012 (all excluding special items) due to lower earnings generated from the company’s all geographic operations except Europe. Despite this, the automaker’s earnings exceeded the Zacks Consensus Estimate by 11 cents per share.

Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6% rise in retail unit sales to 2.4 million vehicles globally. Nevertheless, it was higher than the Zacks Consensus Estimate of $36.4 billion.

General Motors is gearing up for more than 40 major vehicle launches in 2013 across the globe in order to drive sales and revenues. In addition, the company expects its European results will improve further based on its cost reduction measures.

Last month, GM’s sales increased 11.4% to 237,646 vehicles, driven by strong sales of its all four brands and especially Chevrolet Silverado pickup truck. Sales increased 11% for Chevrolet, 34% for Cadillac, 11% for Buick and 7% for GMC. Silverado sales escalated 28% to 39,395 units.

GM’s sales were helped by the recovering auto market in the U.S. as well as by the unpopularity of the Japanese brands in China due to a political conflict between China and Japan.

Auto sales in the U.S. rose 3.5% to 14.92 million vehicles in April. Total vehicle sales went up 8.5% to 1.29 million vehicles in the month. In China, General Motors and its Chinese joint venture partners sold 261,870 vehicles in the month, up 15.3% from Apr 2012.

Currently, shares of GM retain a Zacks Rank #3 (Hold). While we remain on the sidelines about General Motors, stocks that are currently performing well in the broader auto industry include Visteon Corp. (VC) and Denso Corp. (DNZOY) with a Zacks Rank #1 (Strong Buy).

 

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GENERAL MOTORS (GM): Free Stock Analysis Report

PEUGEOT CIT-ADR (PEUGY): Get Free Report

VISTEON CORP (VC): Free Stock Analysis Report

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