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General Motors' (GM) Q3 Earnings: Is a Beat in the Cards?

Zacks Equity Research
Updated

General Motors Company GM is set to report third-quarter 2017 results before the opening bell on Oct 24. In the last quarter, the company delivered a positive earnings surprise of 9.9%.

In fact, in each of the trailing four quarters, the company delivered a positive earnings surprise, the average beat being 14.7%. Also, the long-term expected earnings growth for the company (three to five years) is currently pegged at 9.2%.

General Motors’ shares have returned 30.2% year to date, outperforming the 26.3% growth of the industry it belongs to.

Let’s see how things are shaping up for this announcement.

General Motors Company Price and EPS Surprise

General Motors Company Price and EPS Surprise | General Motors Company Quote

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A Likely Positive Surprise?

According to our quantitative model, chances of General Motors beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients, positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Earnings ESP for General Motors is currently +5.33%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.15 and $1.09 respectively.

Zacks Rank: General Motors carries a Zacks Rank #3. This when combined with a positive ESP makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving the Better-Than-Expected Earnings?

General Motors has a bullish outlook for 2017, mainly backed by strong retail crossover sales. The company projects 2017 adjusted earnings per share in the range of $6.00-$6.50, the mid-point of which is higher than the 2016 figure of $6.12.

The auto giant also anticipates 2017 revenues, adjusted EBIT and adjusted EBIT margin to remain stable or improve from 2016. The automaker is also expected to generate around $8.2 billion of adjusted automotive free cash flow, up from the 2016 figure of around $7 billion. The upbeat outlook is based on robust retail crossover sales.

In September, General Motors’ total U.S. vehicles sales rose 11.9% year over year. In August also, the auto giant’s total U.S. sales increased 7.5% year over year. Higher retail sales and rise in fleet vehicle deliveries were responsible for this rise in total vehicles sales in the United States in two consecutive months. This should give a tremendous boost to investors’ confidence in the stock.

Stocks to Consider

Here are a few other stocks in the auto industry you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Autoliv, Inc. ALV has an earnings ESP of +1.99% and carries a Zacks Rank #2 (Buy). The company will report third-quarter 2017 financial results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks (Strong Buy) here.

Horizon Global Corporation HZN has an earnings ESP of +5.82% and carries a Zacks Rank #3. The company’s third-quarter 2017 financial results are expected to release on Oct 31.

Magna International Inc. MGA has an earnings ESP of +1.91% and carries a Zacks Rank #2. The company’s third-quarter 2017 financial results are expected to release on Nov 9.

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General Motors Company (GM) : Free Stock Analysis Report
 
Autoliv, Inc. (ALV) : Free Stock Analysis Report
 
Magna International, Inc. (MGA) : Free Stock Analysis Report
 
Horizon Global Corporation (HZN) : Free Stock Analysis Report
 
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Zacks Investment Research