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General Motors (GM) Recalls Cars Over Fuel Tank Fault

Tickers in this article: GM

NEW YORK ( TheStreet) --  General Motors  has issued a recall of 1,658 of its Chevrolet Sonic model over concerns a manufacturing fault could cause the fuel tank to separate from the car body. Reuters reports the recall affects 1,558 models in the U.S. and 100 in Canada.

Should the fuel tank separate from the car, it could easily cause a fire if punctured. GM stated it has not received any related reports of fires or accidents but has acted preemptively after discovering the issue at a Michigan assembly plant.

"We continue to like the stock because of the strength in the auto cycle, improved balance sheet, the turn in Europe and market share gains in China," Jim Cramer and Stephanie Link note in their 'Action Alerts Plus' Weekly Roundup .

General Motors shares are trading 0.98% lower to $35.35 in pre-market trading. Shares closed 1.16% higher on Friday to end at $35.70.

TheStreet Ratings team rates General Motors Co as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate General Motors Co (GM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GM's share price has jumped by 44.69%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $4,893 million or 24.12% when compared to the same quarter last year. In addition, General Motors Co has also modestly surpassed the industry average cash flow growth rate of 18.07%.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.

Written by Keris Alison Lahiff.