GM investors brace for earnings, potential political flak
General Motors Co. approaches its quarterly earnings day ready to renew the promise of reshaping itself into a leaner, nimbler 100-year-old car maker.
Wall Street may need some convincing beyond GM’s reporting fourth-quarter profit and sales at least in line with expectations.
GM GM, -0.62% is slated to report fourth-quarter earnings before the bell Wednesday.
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For one, GM may soon find itself in even hotter water with Washington: Workforce cuts are expected to start to roll on Monday, said David Kudla, chief investment strategist with Mainstay Capital Management in Michigan.
As the company unfurls more of its cost-cutting plans, expect “more political and public backlash,” Kudla said in a recent note.
The macro picture is also not that favorable, with U.S. new-car sales slowing and concerns that GM profits may have peaked.
Here’s what to expect:
Earnings: Analysts polled by FactSet expect GM to report adjusted fourth-quarter earnings of $1.24 a share, compared with adjusted earnings of $1.65 a share in the fourth quarter of 2017.
GAAP earnings are expected to come to $1.22 a share, versus a loss of $3.65 in the year-ago period.
Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, expects GM to report an adjusted profit of $1.34 a share.
Revenue: The analysts surveyed by FactSet expect GM to report revenue of $36 billion for the quarter, which would compare with revenue of $37.72 billion a year ago. The Estimize analysts call for $37.01 billion.
Stock reaction: GM shares have roared 16% this year. The stock has fallen about 9% in the past 12 months, which compares with losses around 4% for the S&P 500 index SPX, +0.09% and the Dow Jones Industrial Average DJIA, +0.26% in the same period.
That 12-month loss is slimmer than Ford Motor Co.’s F, -0.91% and Tesla Inc.’s TSLA, +1.69% losses of 21% and 11% in the same period.
What else to look for: GM in January raised its profit guidance for 2018 and said its 2019 profit would grow thanks to resilience in two of its largest markets, the U.S. and China.
Given that, it’s unlikely that it would report any outlook tweaks on Wednesday, said Garrett Nelson, an analyst with CFRA.
The guidance “was very optimistic and we are concerned about GM’s ability to hit the targets,” he said.
Related: GM halts production in Michigan amid natural-gas shortage
Any changes, if needed, would likely come later in the year, Nelson said.
The car maker shook markets in November by announcing a sweeping restructuring plan that included layoffs, closing plants, and streamlining its vehicle lineup.
See also: Ford keeps expectations for the year under wraps
Naturally, analysts will probe for more details on Wednesday, and GM could announce asset sales, details about its future vehicle lineup or the future of Cruise, its driverless-car unit, or disclose new partnerships with other auto makers, but no major surprises are expected.
“2019 will be a pivotal year for GM — one in which we will see how a 100-year-old auto company takes drastic steps to convert from (internal combustion) to electric. It’s a huge bet,” Kudla said.
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