General Motors Co. is scheduled to report fourth-quarter earnings before the bell on Wednesday.
Like other car makers, GM
has seen car sales grow to new heights in 2015. And GM last month provided a bullish outlook for 2016, increasing its share buyback program and raising its dividend, all because its restructuring plan is paying off, it said.
Several analysts, however, are becoming concerned that car sales may have plateaued in the U.S. and elsewhere, with cars becoming more expensive amid rising interest rates that could cut down on credit availability.
So investors will be watching to see if GM outlines any strategy to keep its sales above the rest amid a potential slump. Ford reported better-than-expected adjusted earnings last week on increased demand for its light trucks.
Here’s what to expect from GM results:
Earnings: Analysts polled by FactSet expect GM to report adjusted fourth-quarter earnings of $1.21 a share. That would compare with adjusted earnings of $1.19 a share in the fourth quarter of 2014.
Estimize, a software platform that crowdsources earnings estimates from hedge fund executives, brokerages and analysts, is expecting EPS of $1.20.
Revenue: FactSet analysts are expectingt sales of $36.9 billion for GM, which would be down from $38.3 billion in the year-ago period. The analysts expect increases in sales for GM North America, but decreases for GM Europe and GM South America.
Estimize is forecasting revenue of $37.9 billion.
Share reaction: Shares of GM have lost nearly 9% in the past 12 months, and are down 15% in the last three months. That compares with losses of 3.3% and 7.2%, respectively, for the S&P 500 index.
The analysts surveyed by FactSet have an average price target of $41.81 on GM stock, which is 40% upside over Monday prices. Analysts mostly rate GM shares a buy.
That’s because it has projected $2 billion in material cost savings this year, which will be a “significant differentiating factor” versus other car makers, Credit Suisse said.
Moreover, GM’s year-end inventory is 6% below Ford’s and flat compared with Fiat Chrysler, the analysts at Credit Suisse said.
GM’s car inventory is below normal as compared with historical levels while inventories at its two main rivals is above normal, they said.
Market trends favoring SUVs and light trucks over sedans might not bode well for GM, which has planned to launch key redesigned sedans this year.
“We’d still much rather be selling brand new sedans (particularly ones where material cost is expected to be $500/unit lower than prior model) than old ones,” the Credit Suisse analysts said.
GM appears to be on track to maintain “strong margins” in North America and China this year and to return its European business to a break-even point, analysts at Deutsche Bank said in a recent note to clients.