GM's First Quarter Will Benefit From More Trucks: Analyst
DETROIT (TheStreet) -- Expectations for General Motors' (GM) first-quarter results aren't high, but analysts expect the automaker will benefit from increased truck production.
Analysts surveyed by Thomson Reuters expect earnings of 85 cents a share, down from 95 cents in the same quarter a year earlier. GM reports earnings on Thursday morning. The automaker reported Tuesday that April sales fell 8.2%, with calendar year-to-date sales down 0.4%. Last week, Ford(F) reported that its net income fell 45% for the first quarter, although it did beat estimates.
GM shares are up about 12% for the year, but have generally been in retreat since they reached $27.03, close to the year's high, on April 3. Shares closed Tuesday at $23.31. Meanwhile, Ford shares, which closed Tuesday at $11.23, are up about 2% for the year.
"In Q1, GM is better positioned than Ford in North America," wrote UBS analyst Colin Langan, in a recent report. "GM's production is up 10% vs. only 3% at Ford. Moreover, profitable full-size pickup production is up 20% year over year. Consequently, we expect GM will report a Q1 beat." Langhan is estimating 87 cents a share, and has a buy rating on the shares.
Langan expects global pretax income of $1.7 billion, down from $2 billion in the same quarter a year ago, as a result of declines in Europe and South America. However, "we expect North American profits to be up about $760 million year over year due to higher volume and mix as well as improved year over year pricing," he wrote.
Credit Suisse analyst Chris Ceraso said that GM will benefit from increased production of its full-sized pickups in the quarter, with volume up about 20% from the same quarter a year earlier.
GM "has intentionally overstocked inventories of these units, with days' supply jumping to 130 days by March-end," above the normal inventory of about 80 days, in order to prepare for a changeover to the new T900 platform in the second and third quarters, Ceraso said in a recent report. He estimated first-quarter earnings of 84 cents a share.