DNZOY Denso Corp Ltd (PK)

General Motors Co. (GM) reported a 28.0% fall in earnings to 67 cents per share in the first quarter of the year from 93 cents in the same quarter of 2012 (all excluding special items) due to lower earnings generated from the company’s all geographic operations except Europe.

Despite this, the automaker’s earnings exceeded the Zacks Consensus Estimate by 11 cents per share.

Net earnings fell 31.3% to $1.1 billion from $1.6 billion in the first quarter of 2012. Including a net loss from special items, earnings were $0.9 billion or 58 cents per share in the quarter compared with $1.0 billion or 60 cents a year ago.

Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6% rise in retail unit sales to 2.4 million vehicles globally. It was higher than the Zacks Consensus Estimate of $36.4 billion.

Wholesale vehicle sales edged down 2.5% to 1.6 million units. The automaker occupied a worldwide market share of 11.4% during the quarter compared with 11.2% a year-ago.

Adjusted earnings before interest and tax (EBIT) was $1.8 billion in the quarter compared with $2.2 billion the first quarter of 2012. EBIT for 2013 included the impact of $0.1 billion in restructuring costs.

Segment Results

GM North America (GMNA) generated revenues of $23.0 billion during the quarter, down a 0.8% rise from the prior year. Adjusted EBIT decreased 13.9% to $1.4 billion from $1.6 billion in the first quarter of 2012.

GM Europe (GME) had revenues of $4.8 billion, an 8.3% fall from the previous year quarter. The segment reported a narrower adjusted loss of $175 million in the quarter compared with $294 million in the year-ago quarter.

GM International Operations (GMIO) generated revenues of $4.8 billion, reflecting a 3.9% decline from the prior year. Adjusted EBIT was $495 million in the quarter, down 5.0% from $521 million in the comparable quarter of 2012.

GM South America (GMSA) had revenues of $3.7 billion, a decline of 4.6% from the prior-year quarter. The segment had an adjusted loss of $38 million in the quarter in sharp contrast to a profit of $153 million in the first quarter of 2012.

GM Financial reported a 25.3% rise in revenues to $540 million during the quarter. Adjusted EBIT was almost flat at $180 million compared with $181 million in the year-ago quarter.

Financial Position

General Motors had cash and cash equivalents of $20.6 billion as of Mar 31, 2013 compared with $18.4 billion as of Dec 31, 2012. Total debt (Automotive and Financial) increased to $18.4 billion as of Mar 31, 2013 from $16.1 billion as of Dec 31, 2012. Consequently, debt-to-capitalization ratio increased to 32.9% as of Mar 31, 2013 from 30.7% as of Dec 31, 2012.

During the quarter, the company had a net cash flow of $543 million from automotive operations, significantly down from $2.3 billion in the year-ago quarter. The decline was mainly attributable to lower earnings and a series of timing-related items that GM expects to reverse during the rest of 2013.

After deducting $1.9 billion and $2.0 billion of capital expenditures in the first quarter of 2013 and 2012, respectively, the company had a free cash flow use of $1.4 billion during the quarter compared with an inflow of $282 million a year ago.

Outlook

General Motors is gearing up for more than 40 major vehicle launches in 2013 across the globe in order to drive sales and revenues. In addition, the company expects that its European results will improve further based on its cost reduction measures.

Our Take

GM is a leading global automotive company. The company has presence in almost 120 countries and has facilities located in 30 countries. It currently retains a Zacks Rank #3 (Hold).

GM’s major rival Ford Motor Co. (F) posted an increase of 4.1% in earnings to $1.6 billion and 5.1% in earnings per share to 41 cents in the first quarter of 2013, beating the Zacks Consensus Estimate by 3 cents. Revenues improved 10.5% to $35.8 billion, exceeding the Zacks Consensus Estimate of $32.8 billion.

The improvement in revenues and earnings was mainly attributable to Ford’s strong performance in North America and Asia Pacific and Africa. The company’s results were disappointing in South America due to an unfavorable exchange rate as well as in Europe due to the sluggish economy.

Few stocks that are performing well in the industry include Visteon Corp. (VC) and Denso Corp. (DNZOY). They carry a Zacks Rank #1 (Strong Buy).

 
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