General Motors Fourth Quarter 2012 Earnings Preview: Earnings Per Share Up 31 Percent, But Full Year Growth Slower

  @angeloyoung_a.young@ibtimes.com on February 13 2013 6:01 AM
Newly built cars sit in a shipping lot near General Motors Car assembly plant in Oshawa
Newly built cars sit in a shipping lot near a General Motors assembly plant in Oshawa, Ontario, Canada. Reuters

FEB. 14 UPDATE: General Motors Co. (NYSE:GM) reported on Thursday before markets opened that its earnings fell short of analysts’ average forecast, posting fourth-quarter profits of $1.2 billion, or 48 cents per share, on $39.2 billion in revenue, up from $37.99 billion in the same quarter last year.

--General Motors Company (NYSE:GM), the world’s second-largest auto company, is expected to report a 31 percent increase in fourth-quarter earnings per share on cost-cutting and stronger U.S. demand.

But the Detroit-based auto giant, which filed for bankruptcy in 2009 and floated an IPO the following year, still faces tens of billions of dollars in pension obligations to approximately 110,000 retired GM workers and has had to close factories and lay off thousands of employees in its ongoing reorganizational efforts.

GM will release its quarterly and full-year earnings Thursday before U.S. stock markets open.

On average, analysts polled by Thomson Reuters expect the maker of the Chevrolet, Buick, Cadillac and GMC brands to post fourth-quarter net income of $853.16, or 51 cents per share, on revenue of $39.15 billion. In the fourth quarter of 2011, GM had net income $500 million, or 39 cents per share, on revenue of $38 billion.

For the full year, GM is forecast to post a 16 percent drop in earnings per share compared to 2011, to $3.26 per share from $3.88. Net income is expected to $5.56 billion, down from the previous year's $6.72 billion, and revenue is expected to be $151.48 billion compared with $150.28 billion.

The company has posted profits every quarter since it emerged from bankruptcy as a leaner machine, having sold or discontinued its Pontiac, Saturn, Hummer and Saab brands. In December the company announced it would buy back the remaining 200 million shares of its stock held by the U.S. Treasury through the first quarter of next year. It was only in April of last year that the government still owned 31 percent of GM’s stock from a post-bankruptcy peak of 60.8 percent.

The company has seen its European sales knocked down amid the economic crisis there; it expects to have lost between $1.5 and $1.8 billion in the continent last year. In October the company announced the layoff of 2,600 workers in the region, where it manufactures the Opel brand in Europe and the Vauxhall in Britain.

But early sales of this year’s models, as well as winning the coveted North American Car of the Year award last month for its 2013 Cadillac ATS compact luxury sedan, suggest GM is doing a better job at attracting customers.

"Twenty-six percent of our sales in November were the 2013s, so we see sales of that new model picking up nicely,” said Don Johnson, vice president for Chevrolet U.S. sales, during a conference call in December.

GM is trying to position Cadillac to compete with other established luxury brands in the U.S. and global markets, and it unveiled in December new GMC Sierra and Chevrolet Silverado pickup trucks to go after Ford Motor Company’s (NYSE:F) and Chrysler LLC’s domination in the market. Chrysler’s Ram and Ford’s F150 are among the most popular cars in America.

GM recently shuffled its top brass in its bid to expand global market share. GM Brazil President Grace Lieblein, 51, became head of global procurement and manager of the company’s supply chain after her predecessor, Bob Socia, 58, moved to head the company’s expanding operations in Asia through GM China. Karl-Thomas Neumann, 51, was plucked from Volkswagen AG (ETR:VOW), where he headed the German automaker’s Chinese operations, to lead GM’s European unit as well as to play a key role in the company’s global operations. Retired Adm. Michael Mullen, a former chairman of the Joint Chiefs of Staff and top military adviser to two presidents, was also elected to the company’s board of directors earlier this month.

GM’s U.S. market share stands at 18.7 percent, according to Zacks Investment research, followed by Ford with 15.9 percent and Toyota Motors Corp. (NYSE:TM) with 15.1 percent.

GM has seen its stock price retreat nearly a half a percent from the start of the year, to $28.70, after gaining nearly 50 percent in the last six months of 2012 on the back of a robust latter-half performance sectorwide.

Meanwhile, U.S. auto sales are expected to grow from 14.4 million to 15.4 million vehicles next year.

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