General Motors Co. GM recorded adjusted earnings of $1.4 billion or 86 cents per share in the first quarter of 2015, missing the Zacks Consensus Estimate of 97 cents. In comparison, the company had generated earnings of $0.5 billion or 29 cents per share in the first quarter of 2014. The company recorded solid year-over-year improvement in results, based on the recently launched full- and mid-size trucks, and cost discipline.
Adjusted results for the first quarter of 2015 exclude an unfavorable impact of $0.5 billion or 30 cents per share. A $0.4 billion reduction in net income was related to the change in the business model in Russia, while the remaining $0.1 billion was due to the ignition switch compensation program. In comparison, in the first quarter of 2014, the company had recorded an unfavorable impact of $0.4 billion or 23 cents per share from special items.
Net income (on a reported basis) amounted to $0.9 billion or 56 cents per share, compared with $0.1 billion or 6 cents per share in the year-ago quarter.
Revenues in the reported quarter declined 4.5% year over year to $35.7 billion and missed the Zacks Consensus Estimate of $38.5 billion.
Worldwide wholesale unit sales went down to 1.39 million vehicles in the quarter. Worldwide retail unit sales dropped to 2.39 million vehicles from 2.42 million vehicles in the year ago quarter. The automaker’s global market share was 11% during the quarter, down from 11.1% in the year-ago quarter.
Adjusted earnings before interest and tax (EBIT) increased to $2.1 billion from $0.5 billion in the first quarter of 2014. Operating profit amounted to $753 million, compared with a loss of $535 million a year ago.
Segment Results
GM North America (“GMNA”) reported a 1.1% rise in revenues to $24.7 billion during first-quarter 2015. Adjusted EBIT improved to $2.2 billion from $0.6 billion in the first quarter of 2014.
GM Europe (“GME”) witnessed a 20.8% decrease in revenues to $4.4 billion in the quarter. The region reported an adjusted loss of $239 million compared with a loss of $284 million in the year-ago quarter.
GM International Operations (“GMIO”) reported a decline in revenues to $3.1 billion from $3.2 billion in the year-ago quarter. Adjusted EBIT was $371 million, compared with $252 million in the prior-year quarter.
GM South America (“GMSA”) witnessed a 30.8% decrease in revenues to $2.1 billion. The segment reported adjusted loss of $214 million in the quarter compared with a loss of $156 million in the first quarter of 2014.
GM Financial reported an impressive 23.4% rise in revenues to $1.4 billion during the quarter. EBIT in the segment was $214 million, down from $221 million in first-quarter 2014.
Financial Position
General Motors had cash and cash equivalents of $15.8 billion as of Mar 31, 2015 compared with $18.9 billion as of Dec 31, 2014. Total debt (Automotive and Financial) increased to $48.3 billion as of Mar 31, 2015 from $46.8 billion as of Dec 31, 2014.
During the first quarter of 2015, the company had net cash flow of $375 million from operating activities, down from $2 billion in the comparable year-ago period. Capital expenditures amounted to $1.7 billion in first-quarter 2015 compared with $1.8 billion in the prior-year quarter.
Share Repurchase & Dividend
On Mar 9, 2015, General Motors announced a $5 billion common stock repurchase program. As of Apr 21, the automaker repurchased 19.4 million shares under the program. Of the total shares repurchased, 10 million shares were purchased by Mar 31 for approximately $0.4 billion. In addition, General Motors paid common stock dividends of approximately $0.5 billion to shareholders during the reported quarter.
Outlook
General Motors expects total EBIT and adjusted EBIT margin to rise in 2015 over 2014 levels. The company intends to achieve at least 20% return on invested capital (“ROIC”) through investments in vehicle and technology upgrades. ROIC at the end of the reported quarter was 19.5%, compared with16.9% at the end of the first quarter of 2014.
General Motors currently sports a Zacks Rank #1 (Strong Buy). Better-ranked automobile stocks include Allison Transmission Holdings, Inc. ALSN, CarMax Inc. KMX and PACCAR Inc. PCAR. While Allison Transmission sports a Zacks Rank #1, both CarMax and PACCAR carry a Zacks Rank #2 (Buy).
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