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Why Wall Street Expects GM’s Revenue to Fall in Q1 2019

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Reviewing the trend in GM’s revenue

In the fourth quarter, General Motors (GM) revenue was at ~$38.4 billion, up about 1.8% from its $37.7 billion in revenue in the fourth quarter of 2017. Q4 was the second consecutive quarter when GM’s revenue increased on year-over-year after declining in the previous five quarters. GM has managed to beat Wall Street analysts’ consensus revenue estimates compiled by Reuters for the last six quarters. Now, let’s see what analysts expect for GM’s first-quarter revenue.

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Revenue estimates for Q1 2019

According to Thomson Reuters data, analysts expect the trend in General Motors’ revenue to turn negative after remaining positive for the previous six quarters. Analysts expect the company’s first-quarter revenue to be at $35.2 billion, down 2.5% compared to revenue of $36.1 billion in the first quarter of 2018.

In the second quarter, analysts expect the company’s revenue at $36.3 billion, down 1.2% year-over-year.

Key factors

After positive year-over-year sales growth in the first half of 2018, General Motors’ Chinese sales turned negative in the second half, partly due to the slowing Chinese economy. This weakness continued in the first quarter as sales fell 17.5% year-over-year. In the last quarter, GM’s Chevrolet, Buick, and Cadillac brand vehicle sales fell 13.8%, 17.0%, and 18.9%, respectively in China.

Lower Chinese sales could affect GM’s total revenues in the first quarter. In contrast, GM’s rising pickup truck sales in the US market could act as a tailwind to its first-quarter revenue and profits.

Currently, global auto giants GM, Ford (F), Tesla (TSLA), Fiat Chrysler (FCAU), and Toyota (TM) earn a significant portion of their revenues from the US market.

For the last few years, GM has been trying to expand its market share in the world’s largest auto market—China. During the same period, General Motors has exited several markets, including Europe, South and East Africa, and India, due to a consistent struggle for sales and profitability in these markets. This move has affected the company’s global sales volume and market share.

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