General Motors Q1 Earnings Result: What Investors Need to Know

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Apr 26, 2015

General Motors (GM, Financial) released its first quarter 2015 earnings result on April 23. Despite stronger performance in the North American market, investor were disappointed as the automaker’s quarterly earnings and revenue fell short of analysts’ estimates. Weakness in the South American and Russian market had a bearing on the overall demand. As a result, General Motors shares dropped more than 3% to $35.92 a share after the earnings announcement. Here’s a look at the largest American automaker’s performance in the past quarter to get a deeper insight.

The key takeaways from the quarter
General Motors’ revenue dropped 4.5% to $35.7 billion compared with $37.4 billion a year earlier, and was well below analysts’ estimate of $37.6 billion. Poor sales volume in Brazil and Russia were the main culprits. Last month the company announced that it would shut down a factory at Russia and withdraw the Opel brand as demand isn’t enough to sustain operations. Besides, the depreciating currency in South America against the U.S. dollar also impacted the automaker’s sales there.

General Motors said that it sold 2.4 million vehicles in the first quarter this year, which is an improvement of 2% over last year numbers for the same period. Volumes were led by the China, where deliveries rose 9%, and North America where sales volume grew 6%.

The automaker’s quarterly net income increased to $945 million, on the back of a strong North American market. The results have shown a remarkable improvement over last year first quarter when General Motors was entangled in massive recalls and reported a profit of $125 million only. The Detroit carmaker said that results were boosted by pickups sales in the U.S. market. The company’s pre-tax profit from North America jumped to $2.2 billion, compared with $600 million registered in the year ago quarter when it had to take a charge of $1.3 billion for recalls.

However, the company continues to struggle in some of its international markets. In Europe, the company registered a pre-tax loss of $239 million, while in South America it suffered a loss of $214 million. Some special charges including $428 million related to Russia also reduced the quarter’s earnings. General Motors also set aside an amount of $150 million for compensation to victims of the defective ignition switch.

Performance in the key markets

North America: Strong demand for full-size pickups and SUVs helped push volumes considerably. As dealers of Ford (F, Financial) F-Series didn’t have sufficient stock of the pickup, General Motors’ Silverado benefitted immensely from the soaring truck demand. The company launched Malibu, Spark and the Cadillac CT6 at the recently held New York auto show. General Motors has got positive response for all its releases. The Cadillac CT6 is very crucial as it showcases the company’s latest technology. These launches are very crucial for General Motors from the point of view of helping it achieve its 2015 and 2016 targets.

China: China is General Motors’ strongest international market. The company expects this Asian economy to grow around 6% to 8% in the next year. The automaker is about to launch the Buick Excelle, Chevrolet Sail 3, and the Buick Envision in the market.

Europe: Europe is still not fetching positive earnings for General Motors. However, the automaker has seen year on year improvement in its performance with losses shrinking despite difficulties in Russia. Its sales increased 3.1% against an industry growth of 2.8%. The company also saw its market share get better in 11 European markets. Demand for Corsa was seen to rise.

Looking ahead
General Motors’ upcoming launches is going to put the carmaker in a strong position in the key markets of North America, China, and Europe. The company is gradually gaining traction in the European market that has been struggling in the past few years. The automaker expects to see revenue growth in this market and sustain margins in China.