On Sep 3, 2014, we issued an updated research report on General Motors Co. (GM). This Zacks Rank #3 (Hold) stock reported a 25.6% negative earnings surprise in the last quarter.
General Motors recorded adjusted earnings of $1.5 billion or 58 cents per share in the second quarter of 2014, missing the Zacks Consensus Estimate of 78 cents. In comparison, the company generated earnings of $1.4 billion or 84 cents per share in the second quarter of 2013.
General Motors is positioned to benefit from its focus on the emerging markets, particularly Brazil, China and India. In order to recoup global sales, the company is increasingly investing in capacity expansion to meet growing demand. In Aug 2014, General Motors do Brasil – the largest subsidiary of General Motors in South America – announced its intentions to invest $2.9 billion in Brazil in the 2014–2018 period to develop new products and technologies, and to train employees.
Moreover, General Motors is poised to benefit from its attempt to strengthen operations and launch new and upgraded products. The company plans to make regular investments in the U.S. In Aug 2014, General Motors announced plans of investing $185 million in the Spring Hill manufacturing complex, Tennessee and an additional $48.4 million investment in the Bedford, Indiana powertrain castings plant. These investments will support the manufacture of the new small displacement engine.
However, General Motors has been facing the brunt of delaying the recall of 2.6 million vehicles with defective ignition switches. The company has launched a program to compensate the victims and families affected by crashes caused by the ignition switch problem. Till Aug 26, there were 309 claims filed, of which 107 were reports of deaths.
Apart from this, General Motors has been recalling vehicles in large numbers. The automaker announced 66 recalls covering about 29 million vehicles in North America so far this year. Owing to the series of recalls made recently, the company recorded a $2.5 billion charge for recall-related repairs in the first half of 2014.
Other Stocks to Consider
Investors interested in automobile stocks could also consider Visteon Corp (VC), Tesla Motors, Inc. (TSLA) and Fox Factory Holding Corp (FOXF). While Visteon and Tesla sport a Zacks Rank #1 (Strong Buy), Fox Factory carries a Zacks Rank #2 (Buy).
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