Existing trend in GM’s earnings
In 4Q16, General Motors (GM) reported an adjusted EPS (earnings per share) of $1.28, which was about 8% lower than its 4Q15 EPS of $1.39. Previously, Wall Street analysts had been estimating GM’s 4Q16 EPS to be ~$1.17.
General Motors reported a negative YoY (year-over-year) change in its earnings for the first time, after reporting positive growth in the previous nine consecutive quarters.
GM’s 1Q17 earnings estimates
For 1Q17, Wall Street analysts expect GM to be driving back toward positive earnings growth after the drop it saw in the previous quarter. According to these estimates, GM’s 1Q17 adjusted earnings should be ~$1.45 per share, which would reflect a rise of about 15% from the adjusted EPS of $1.26 in the corresponding quarter of last year.
Key positive factors
GM’s 1Q17 retail sales rose 1.9% YoY to 546,838 vehicle units. Its US retail sales market share also improved to about 16.8%, a 0.20% rise from 1Q16.
According to Autodata Corporation, US auto sales hit an all-time high in 2016, with ~17.6 million vehicles sold. Mainstream automakers (FXD) GM, Ford Motor (F), Toyota Motor (TM), and Fiat Chrysler Automobiles (FCAU) all benefitted from this strong demand.
Falling auto sales
By contrast, in the first quarter of 2017, US auto sales were at 4.0 million vehicle units, representing a fall of 1.5% on a YoY (year-over-year) basis. Given these declines, GM’s ability to post an increase in its 1Q US sales could be the primary reason why analysts are positive on its 1Q results.
Although we must not forget that the auto industry is highly cyclical in nature. For this reason, the possibility of the US auto sales entering a downturn in the near future can’t be ruled out.
Now let’s take a look at the analysts’ recommendations for GM stock before its 1Q17 earnings release.