General Motors Company (GM) posted a profit of $2.54 billion or $1.54 per share in the second quarter of the year, which almost doubled from $1.33 billion or 85 cents per share in the same quarter of 2010. With this, the automaker has beaten the Zacks Consensus Estimate by 33 cents per share.
Revenue in the quarter appreciated 19% to $39.37 billion (including $330 million from GM Financial) on worldwide sales of 2.32 million units versus 2.16 million a year ago, thereby capturing a market share of 12.2%. It also exceeded the Zacks Consensus Estimate of $36.61 billion.
Operating income rose to $2.45 billion from $1.90 billion a year ago. Earnings before interest and tax (EBIT) was $3.0 billion (adjusted) compared with $2.0 billion in the second quarter of 2010.
Segment Results
GM North America (GMNA) generated $23.13 billion in revenues, up 14% from the year-ago level. EBIT increased to $2.25 billion from $1.59 billion in the second quarter of 2010.
GM Europe (GME) generated $7.46 billion in revenues, an increase of 23% from the previous year. EBIT was $102 million compared with a loss of $160 million in the prior-year quarter.
GM International Operations (GMIO) had revenues of $6.62 billion, a 24% growth from the prior year. EBIT rose by $69 million to $573 million during the quarter.
GM South America (GMSA) generated revenues of $4.36 billion, a 21% increase from the prior-year quarter. However, EBIT dipped to $57 million from $195 million in the second quarter of 2010.
Financial Position
GM had cash and cash equivalents of $20.47 billion as of June 30, 2011 compared with $21.06 billion at the end of 2010. Total debt increased to $4.72 billion as of the above date from $4.63 billion as of December 31, 2010. However, debt-to-capitalization ratio decreased to 10.3% from 11.3% in the year-ago period.
In the first half of 2011, the company had a cash flow of $4.37 million, down from $5.70 billion in the same period a year ago. Meanwhile, capital expenditures rose to $2.49 billion from $1.85 billion in the 2010-period. This translated into free cash flow of $1.87 billion, significantly down from $3.84 billion in the first half of 2010.
Peer Performance
GM fared well compared with its hometown rival, Ford Motor Co. (F) during the quarter under study. Ford posted a profit of $2.64 billion or 65 cents per share in the second quarter, a $67 million or 2.5% decline from $2.70 billion or 68 cents per share in the corresponding quarter of 2010. However, the company’s profits were higher than the Zacks Consensus Estimate of 60 cents per share.
The decline in profit resulted from an anticipated slump in Financial Services results. The automaker has already cautioned its investors in the near past about the non-recurrence of lower lease depreciation expense and lower credit loss reserve reductions in 2011 compared with 2010. It revealed that these two items are expected to reduce the company’s profit by $1.1 billion in 2011 on a year-over-year basis.
Our Take
GM, a Zacks #3 Rank (Hold) stock, had to seek bankruptcy protection in 2009 due to unfavorable economic conditions and a rapid decline in sales. However, the automaker recouped its sales and earnings by banking on the emerging markets, economic recovery and improved cost structure. The company completed its IPO at the end of 2010, through which it repaid up to $23.1 billion to the U.S. government.
Based on the current industry outlook, the automaker anticipates adjusted EBIT for the second half of 2011 to be modestly lower than in the first half of the year. It also expects full year adjusted EBIT to improve massively over 2010.
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment