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Can GM’s Profit Margins Expand like Ford’s in Q1 2019?

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GM’s Q1 2019 results

Tomorrow before the market opens, the largest US automaker, General Motors (GM), is set to release its first-quarter earnings report. According to Wall Street analysts’ consensus data, the company is expected to report a 2.3% year-over-year decline in its first-quarter revenue to $35.3 billion while its adjusted earnings are expected to fall 22.5% to $1.11 per share.

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Ford’s solid first-quarter profit margin

Last week on April 25, General Motors’ direct peer and America’s second-largest US automaker, Ford Motor Company (F), reported its first-quarter results. Ford’s first-quarter adjusted earnings rose 2.3% year-over-year to $0.44 per share. On the brighter side, Ford posted an improvement in its automotive segment’s EBIT margin to 5.4% last quarter from 4.4% a year ago, driven mainly by stronger profitability in North America due to stronger demand for trucks.

Estimates for GM’s Q1 2019 profit margins

In the fourth quarter of 2018, GM reported about a 6.9% year-over-year drop in its adjusted pre-tax profit with a profit margin of 7.3%, compared to 7.9% in the fourth quarter of 2017.

Wall Street analysts expect the negative trend in General Motors’ profitability to continue in the first quarter this year. According to the consensus estimates, analysts expect GM to report an adjusted pre-tax profit margin of 5.4% in the first quarter of 2019, much weaker than its 7.2% in the first quarter of 2018.

These estimates suggest that General Motors’ profit margins might grow in the first quarter, like its home market peer Ford.

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