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General Motors' 1Q17: Behind the Analysts' Estimations

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Part 5
General Motors' 1Q17: Behind the Analysts' Estimations PART 5 OF 8

How Much Will GM’s Focus on Retail Sales Expand Its 1Q17 Margins?

GM’s margin trends

General Motors’ (GM) continued focus on its retail vehicle sales in North America as well as its an improved performance in China could increase its revenues in coming quarters. In 4Q16, GM’s reported adjusted EBIT (earnings before interest and taxes) of $2.4 billion, with a margin of 10.1%. This margin was lower than its adjusted EBIT margin of 12.2% in 4Q15.

How Much Will GM&#8217;s Focus on Retail Sales Expand Its 1Q17 Margins?

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Similarly, GM’s net profits also fell sharply in 4Q16 to $1.8 billion, with net profit margins of 4.1%—significantly lower than its adjusted net profit margin of 5.6% in 4Q15.

We should note, however, that in 4Q15, GM reported a rise of $4.0 billion in its net profits from special items. For this reason, comparing GM’s 4Q16 net profit margins with its 4Q15 net profit margins isn’t a good idea because the results of such a comparison could be distorted by one-time special items.

GM’s 1Q17 margin estimates

According to analysts’ estimates, GM’s 1Q17 EBITDA (earnings before interest, taxes, depreciation and amortization) margin should be 13.5%, which reflects a rise over its 1Q15 EBITDA margin of 13.1%. The company’s 1Q17 adjusted net profit margin is also likely to expand to 5.6% from 5.3% in 1Q16.

GM’s higher retail sales along with strong heavyweight vehicle sales in 1Q17 could be the reason why analysts expect the company’s margins to expand. Also, GM currently has a higher margin than Ford Motor (F) and Fiat Chrysler Automobiles (FCAU), though Toyota Motor (TM) has maintained industry-leading (XLY) margins, partly due to its relatively stronger global premium vehicle portfolio.

In the next part, we’ll forecast a few highlights in GM’s upcoming 1Q17 earnings event.

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