General Motors (GM, Financial) released its second-quarter earnings on Thursday before the market opened. The Detroit-based automaker’s quarterly earnings and revenue surpassed estimates courtesy of high sales of lucrative pickup trucks and crossovers, which more than compensated for poor sales in China.
As part of its reorganization program, GM closed down factories. This helped the company to reduce its labor cost, which in turn, boosted its earnings.
Earnings highlights
For the second quarter, the company posted net income of $2.42 billion, or $1.66 per share, up from $2.39 billion, or $1.66 per share, reported in the second quarter last year. Its adjusted earnings per share were $1.64, topping analysts’ expectations of $1.44. Revenue stood at $36.1 billion, edging past expectations of $35.98 billion.
At quarter-end, the company had cash and cash equivalents of $17.1 billion. Adjusted automotive free cash flow during the second quarter amounted to $2.53 billion. Reflecting on the quarter’s performance, GM's CFO Dhivya Suryadevara said in a statement:
“We had a solid second quarter and expect the second half of the year to be stronger than the first half. Our confidence in our full-year outlook is based on our strong full-size truck rollout, other key launches and ongoing cost savings.”
Segment performance
In North America, General Motors’ revenue was $28.3 billion, compared to revenue of $28.5 billion reported in the prior year. Thanks to the launch of new pickup truck models in the U.S., the company’s average transaction price reached a record $37,126 in North America, thereby boosting operating income.
At GM China, the company posted a 12% sales decline due to a slowing economy as well as pricing pressure. General Motors generated income of $235 million, which was significantly down from a record income of $592 million reported in the same period last year.
In a statement, the company said: "Due to China's economic slowdown, China industry unit sales are expected to remain weak through the second half of the year, with industry deliveries projected to be down for the full year.”
Looking ahead
In North America, the carmaker will introduce heavier pickup truck models in the second half of the year and into 2020. Amid the challenging macroeconomic conditions in China, the company will make a series of vehicle launches in the remainder of the year in view of turning its sagging sales around.
The company projects 2019 diluted earnings per share to be $5.14.
Disclosure: I do not hold any position in the stock mentioned.
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