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Why General Motors (GM) Is Down Today

Tickers in this article: GM
Update (4:22 p.m. EST): Updated with closing price, day high and low prices, price change and volume information. 

NEW YORK (TheStreet) -- General Motors fell 1.6% to $39.38, down 64 cents from its previous close of $40.02, at the close of the trading day on Wednesday after the automaker announced that it expects a slight profit increase and flat margins in 2014.

The stock had a volume of 88,748,392, more than four times its average of 22,136,300. It hit a high of $39.77 and a low of $38.96 for the day.

GM's new executive team, led by CEO Mary Barra and President Dan Ammann, offered a cautious outlook, as the company anticipates only a minor increase in pretax profit in 2014. GM has continued to cut its losses and increase revenue in Europe, according to the executives, and the automaker expects growth in the U.S. and China in 2014 to help fund $1.1 billion in restructuring.

GM also plans to open four new plants in China, the company's best market, through 2015 in order to increase production capacity to 5 million vehicles annually there. This would keep GM on pace with Volkswagen in that market. GM built 3.3 million vehicles in North America in 2013.

TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about its recommendation:

"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by a number of strengths, 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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. 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 12.7%. Since the same quarter one year prior, revenues slightly increased by 3.7%. 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 35.10%, 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.87, 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.
  • Net operating cash flow has increased to $3,860.00 million or 14.09% when compared to the same quarter last year. Despite an increase in cash flow, GENERAL MOTORS CO's cash flow growth rate is still lower than the industry average growth rate of 30.74%.
  • GENERAL MOTORS CO's earnings per share declined by 49.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GENERAL MOTORS CO reported lower earnings of $2.93 versus $4.62 in the prior year. This year, the market expects an improvement in earnings ($3.39 versus $2.93).
  • You can view the full analysis from the report here: GM Ratings Report