General Motors Misses Q2 Earnings & Revenues on Recalls

General Motors Co. GM recorded adjusted earnings of $1.5 billion or 58 cents per share in the second quarter of 2014, missing the Zacks Consensus Estimate of 78 cents per share. In comparison, the company generated earnings of $1.4 billion or 84 cents per share in the second quarter of 2013.

Adjusted results for the second quarter of 2014 exclude the unfavorable impact of $1.3 billion or 47 cents per share related to net loss from special items. Meanwhile, in the second quarter of 2013, the company recorded unfavorable impact of $0.2 billion, or 9 cents per share from special items. Net income (on a reported basis) amounted to $0.2 billion or 11 cents per share, compared with $1.2 billion or 75 cents per share in the year-ago quarter.

Revenues in the quarter grew 1.5% year over year to $39.6 billion, lagging the Zacks Consensus Estimate of $40.8 billion. The year over year increase was driven by better pricing and new product introduction.

Worldwide wholesale unit sales inched down 7.8% to 1.50 million vehicles in the quarter. Worldwide retail unit sales rose 0.6% to 2.51 million vehicles. The automaker occupied a global market share of 11.3% during the quarter, down from 11.6% in the prior-year quarter.

Adjusted earnings before interest and tax (EBIT) went down 40.6% to $1.4 billion from $2.3 billion in the second quarter of 2013. The decline was mainly due to a $1.2 billion pre-tax charge for recall-related costs and $0.2 billion of restructuring costs included in the second quarter of 2014.

The company logged pre-tax charges of $0.2 billion for recalls and $0.1 billion in restructuring costs in the year-ago quarter. Operating loss amounted to $471 million, considerably down from a profit of $1.8 billion a year ago.

Segment Results

GM North America (GMNA) reported a 9.3% rise in revenues to $25.7 billion during the second quarter. Adjusted EBIT declined to $1.38 billion from $1.98 billion in the second quarter of 2013.

GM Europe GME witnessed a 6.6% increase in revenues to $5.97 billion. The region reported a wider year-over-year adjusted loss of $0.3 billion compared with $0.1 billion in the year-ago quarter.

GM International Operations (GMIO) results were disappointing. The operations reported a 25% decline in revenues to $3.6 billion. Adjusted EBIT increased to $0.32 billion from $0.23 billion in the comparable quarter of 2013.

GM South America (GMSA) witnessed a 26.3% decrease in revenues to $3.2 billion. Adjusted loss was $81 million in the quarter compared with profit of $54 million in the second quarter of 2013.

GM Financial reported an impressive 42.5% rise in revenues to $1.2 billion during the quarter. EBIT in the segment was $0.3 billion, in line with the second quarter of 2013.

Financial Position

GM had cash and cash equivalents of $19.9 billion as of Jun 30, 2014 compared with $20 billion as of Dec 31, 2013. Total debt (Automotive and Financial) increased to $40.1 billion as of Jun 30, 2014 from $36.2 billion as of Dec 31, 2013. Consequently, the debt-to-capitalization ratio increased to 48.8% as of Jun 30, 2014 from 45.9% at the end of 2013.

During the first half of 2014, the company had a net cash flow of $5.8 billion from automotive operations, up from $5.7 billion in the comparable year-ago period. Capital expenditures amounted to $3.4 billion in the reported quarter versus $3.8 billion in the prior-year period.

GM currently holds a Zacks Rank #3 (Hold). Some better-ranked automobile stocks worth considering include Tower International, Inc. TOWR, Visteon Corporation VC and American Axle & Manufacturing Holdings Inc. AXL. Tower International and Visteon sport a Zacks Rank #1 (Strong Buy) while American Axle is a Zacks Rank #2 (Buy) stock.
 

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