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James Li
James Li
Articles (617)  | Author's Website |

Einhorn’s General Motors Soars on Strong 3rd Quarter Sales Growth

Auto manufacturer reports strong performance in both U.S. and China

October 31, 2018 | About:

General Motors Co. (NYSE:GM), one of David Einhorn (Trades, Portfolio)’s largest holdings, said third-quarter revenues increased 6.4% on several factors, which include strong profit margins in the U.S. and record equity income in China.

The Detroit-based auto manufacturer reported net income of $2.503 billion, or $1.75 in diluted earnings per share, compared to net loss of $2.983 billion, or $2.03 in diluted loss per share.

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Company accelerates sales volume with Honda partnership and new full-size trucks

GM CEO Mary Barra said the quarterly results demonstrate the company’s determination to “manage risks and deliver strong business results” while further advancing the future of mobility. The company’s North America business segment posted a strong 10.2% margin driven on record average transaction price, lean inventory and a solid product mix featuring vehicles like Cadillac Silverado and GMC Sierra. Chief Financial Officer Dhivya Suryadevera said the company delivered approximately 45,000 of the new full-size trucks during the third quarter and expects to deliver an additional 75,000 in the fourth quarter.

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On Oct. 3, GM announced it joined forces with Honda Motors Co. Ltd. (HMC)(TSE:7267) to develop an all-purpose autonomous vehicle at “high volume for global deployment.” Barra said in a press release the partnership enables GM Cruise to reach a global audience and propel Cruise as one of the top leaders in automobile vehicle technology. Per the partnership agreement, Honda will invest $2.75 billion over 12 years to support the above initiatives.

On the earnings call, Barra and Suryadevera underscored GM’s strong performance in China despite “challenging market conditions” stemming from the ongoing trade war between China and the U.S. Cadillac sales in China increased 4% year over year and 20% year to date on strong demand for XT4 compact luxury SUVs. The strong performance in domestic and international markets enabled management to give fourth-quarter guidance at the high end of the previous guidance, “with the potential for additional upside.”

Stock rises on revenue and earnings beat

Shares of GM traded at an intraday high of $36.45, up 8.7% from the previous close of $33.53 on earnings that outperformed top-line estimates by approximately $1.58 billion and bottom-line estimates by approximately 68 cents per share.

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Einhorn and Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio) have not released their third-quarter portfolio as the deadline is 45 days after quarter end. As of the second quarter, Einhorn owns 21,160,843 shares while Buffett owns 51,393,611 shares. Other gurus cheering on GM’s strong results include Bill Nygren (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).

Disclosure: no positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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