General Motors Posts Impressive Numbers On High SUV Demand

Mayank Marwah

General Motors had a decent 2015 with sales growth of 5% despite an unpredictable global economy. The industry outlook for the current year is positive although the overall global market is expected to slow down. General Motors recently recorded strong fourth-quarter and full-year earnings beating analyst expectations.

Robust sales of light trucks in the domestic market and growth in China helped in boosting the company’s top and bottom lines during the quarter. Improvement in China is an encouraging sign for the company as this Asian economy is the largest international market for the Detroit automaker. In fact, the carmaker sells more vehicles in China than in the U.S. Here’s a brief look at the company’s operational and financial performance and the outlook for the current year.

A look at the numbers

General Motors earned a net profit of $6.3 billion in the final quarter of 2015. Adjusted earnings per share surged to $1.39 from $1.19, up 17% as compared with the last year. Sales in North America spiked 8.6% in the fourth quarter. The gain is attributable to heavy sales of SUVs and pickups thereby increasing the quarter’s revenue by $1.3 billion. For the full year, General Motors' net profit tripled to $9.7 billion over last year’s $2.8 billion. This is attributable to the company’s robust performance in North America and China, backed by a turnaround in Europe.

The company recorded revenue of $39.6 billion in the fourth quarter, comfortably beating Wall Street analyst estimates of $39.3 billion. It generated $152.4 in revenue for fiscal 2015. The revenue for the last quarter remained flat while it declined for the full year. This is primarily on account of unfavorable foreign exchange rates.

General Motors continues to impress

The company recorded $2.77 billion in profits in North America for the fourth quarter as compared to $2.2 billion a year ago. This was driven by higher sales led by strong demand for high margin pickups and SUVs. The company sold 64,000 more vehicles in the region. Sales of SUVs and pickups surged 16% in the U.S. in 2015.

General Motors’ international operations recorded earnings of $408 million in the last quarter of 2015 against $396 million a year ago. China was the key factor of growth where SUVs sold like hot cakes. The company’s equity income in China rose to $579 million, up from $516 million. Though the company’s growth in the Chinese market has slowed, it has managed to increase sales of more profitable SUVs and luxury car segment in order to improve its earnings.

In Europe, the company registered a pretax loss of $298 million in 2015 compared with a loss of more than $390 million in 2014. The company’s proposal to close its operations in Russia has negatively impacted its sales and market share. The company has been suffering losses for the past 10 years in Europe but remains optimistic that it will make a grand comeback and will be right on track in 2016. The launch of new models and reduction in cost should help the company see better results in this critical market in 2016.

Source: 
GuruFocus