Light trucks help pull GM profit well ahead of expectations
Earnings per share have more than doubled compared to previous year
General Motors Co.’s second-quarter net income of $1.1 billion (U.S.) beat analyst estimates by a wide margin as rising light-truck sales in the U.S. and surprising strength in China led the way.
The company said that adjusted earnings per share were $1.29, beating the average analyst estimate of $1.06 and more than doubling the results from a year ago.
Chief financial officer Chuck Stevens said record margins in North America and improved profit in China boosted the bottom line.
GM’s profit rebounded from a year earlier as U.S. buyers continued their love affair with trucks and the automaker overcame a tough car market in China by boosting sales of moreexpensive sport utility vehicles and Cadillacs.
Concerns about weakness in China have weighed on GM’s shares, sending the stock down 13 per cent this year through Wednesday.
“The first two quarters of the year were strong as we fully capitalized on a robust North American industry and maintained our strength in China, despite the challenging conditions in that market,” chief executive officer Mary Barra said in a statement.
The company expects earnings in North America and China to continue to improve in the second half.
“We had a strong quarter that will surprise people with strength where it counts,” Stevens told reporters at company headquarters in Detroit. “We’re confident we can sustain that in the second half.”
The U.S. market continues to be healthy, and GM posted a record 10.5 per cent profit margin in North America, measured as adjusted earnings before interest and taxes.
Adjusted EBIT for the region rose to $2.8 billion from $1.4 billion.
GM said equity income from its China joint ventures rose to $502 million from $476 million a year ago. Even as auto sales have struggled in the market, GM is selling more SUVs and Cadillac luxury cars. It has also cut costs.
In the first half, GM’s market share in China rose slightly to 14.6 per cent.
GM had $1.1 billion in pretax adjustments, with $600 million coming from currency-related issues in Venezuela, $400 million in charges related to restructuring in Thailand and adding $75 million to the estimated costs of its ignition-switch recall-compensation program.
The company reported a $100 million loss in South America, similar to a year earlier, and broke even in Europe after losing $300 million there last year.
“We had a strong quarter that will surprise people with strength where it counts. We’re confident we can sustain that in the second half.” CHUCK STEVENS CHIEF FINANCIAL OFFICER OF GM
Revenue fell to $38.2 billion. Analysts had predicted sales of $40.4 billion, up from $39.6 billion a year ago. GM said in January that the results for the year would be better than expected thanks to a resurgence of truck sales in the U.S.
GM also said it has earned a return on invested capital of 23.4 per cent over the past 12 months, beating its target of 20 per cent that was established when the company settled with activist investor Harry Wilson earlier this year.