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Analyzing GM Financial Company’s 1Q18 Performance

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GM’s financial services

In 1Q18, General Motors (GM) reported $3.4 billion in revenues from its financial services arm, which is about 25.9% higher than its revenues of $2.7 billion in 1Q17. In 1Q18, GM’s financial services arm’s adjusted EBIT[1. earnings before interest and tax] doubled YoY (year-over-year) to $0.4 billion from $0.2 billion in 1Q17.

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Other highlights

A large number of retail customers prefer to finance their vehicles, especially with low interest rates. As GM focus on retail vehicle sales, investors could expect this positive trend in GM Financial’s revenues to continue in 2018.

The improved performance of GM Financial (or GMF) was primarily due to the company’s full captive strategy execution. GMF’s retail penetration fell to 41.0% in 1Q18 from 50.0% in 1Q17 in the US market. In contrast, the company’s retail penetration increased to 67.0% in 1Q18 from 61.0% in 1Q17.

Contribution to GM’s business

GM Financial’s revenues accounted for 9.4% of GM’s total revenues in 1Q18, compared to 7.2% in 1Q17. Large automakers (IYK) such as Toyota (TM), Ford (F), and Volkswagen (VLKAY) also provide financing options to their customers and dealers with their in-house financial services arms.

Continue to the next part to see how GM’s valuation multiples look after its 1Q18 results.

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