General Motors Company (NYSE:GM) Renaissance Center. Photo Credit: General Motors.
There was a bit of pressure on General Motors Company (NYSE:GM) to beat analyst estimates this morning after crosstown rival Ford Motor Company (NYSE:F) soundly beat estimates yesterday with a very strong second quarter. Ford Motor Company (NYSE:F)’s strong beat even helped give General Motors Company (NYSE:GM)’s stock price a small boost yesterday in hopes that it would imitate Ford Motor Company (NYSE:F)’s narrowed losses in Europe and stronger profits from truck sales – sales from which both derive much of their profits. Well, General Motors delivered, beating Wall Street estimates, and with a couple bright spots in its report.
By the numbers
Starting from the top, General Motors Company (NYSE:GM)’s net revenue in the second quarter reached $39.1 billion, a 4% improvement from last year’s $37.6 billion. From that revenue GM managed a net income of $1.2 billion, or $0.75 cents per fully diluted share, which includes a special item loss that reduced net income by $0.09. Typically analysts don’t take into account special items in their estimates, so by excluding that special item, General Motors Company (NYSE:GM)’s EPS came in at $0.84 cents per share – handily beating Wall Street expectations.
Although beating expectations, EPS still came in below last year’s second-quarter results that reached $0.90 cents per share. Part of that reason was due to the costs of launching its very important redesigned trucks – the Silverado and the Sierra. This will weigh a little bit next quarter, but one positive aspect about it is the way inventory was handled.
In April, investors were concerned that General Motors Company (NYSE:GM) wouldn’t be able to lower inventory in time and would face a large profit and margin pinch because heavy incentives would be needed to move older product – amplified by the fact that the new model Silverado wouldn’t have a price increase.
“We’ve had a very successful time managing through the inventory transition from the old truck to the new truck,” CFO Dan Ammann said at General Motors Company (NYSE:GM) headquarters today, according to Automotive News.
Avoiding the inventory crisis paved the way for strong profits from the Silverado (GM’s biggest profit maker), the Cadillac ATS, and the Impala, which boosted earnings before taxes and interest in North America nearly $2 billion. But there was another bright spot in the company’s report: its narrowed losses in Europe.