Before the market opens on Tuesday, General Motors is expected to announce its earnings report ending September 2016. Prior to this, the automobile company unveiled a series of investments and addition of the production line. Can these push the stock higher after a slight recovery from the previous sessions?
GM Stock Recap
The prominent Detroit, Michigan vehicle company remained moderately steady before its earnings report. From the previous session, the stock advanced 0.29 percent or 0.91 percent to trade at $32.04 after opening at $31.94. GM had a session high of 32.03 and a session low of 31.89 with a market capitalization of $50.04 billion. The price earnings ratio of the stock stood at 4.1 and its dividend yield went 4.74 percent.
In the second quarter, the General Motors had net revenue of $42.4 billion and earnings per share of $1.81. Chairman and CEO Mary Barra noted that it was an outstanding quarter for the company with strong results from retail sales in the U.S. and China. The adjusted automotive free cash flow of the company was $3.2 billion and a total liquidity of $34.1 billion, with an automotive cash and marketable securities of $20.1 billion.
For the following quarter, the company expressed the confidence over its aggressive vehicle launch partnered with robust global industry sales. The company adjusted its 2016 full year EPS diluted from $5.25-$5.75 to $5.50-6.00. By 2020, GM is looking forward for a higher volume of new and refreshed vehicles as it increases its total global volume to 40 percent.
General Motors is gearing for more innovation at it bet $9 million to improve its very own vehicle emissions test lab in Melbourne, Australia. GM Holden, popularly known as Holden, holds various vehicle operations, which include emission tests of Cadillac, Chevrolet and Opel units released worldwide.
The spokesperson of Holden explained that the investment only goes to show that the Detroit based company has a long term commitment to Holden and will retain hi-tech and high skilled jobs within the company. The investment came amid the strict Australian regulations regarding the vehicle emissions standards which have affected not only the United States but even the Euro region.
Meanwhile, the partnership between GM and China’s SAIC the previous year is set to break records with almost 400,000 units sets to produce on an annual basis. The new production line will include mostly of GM Chevrolet Equinox SUV’s as Chinese market keeps on accommodating huge interest over multi-purpose vehicles, luxury vehicles and sport-utility cars.
SAIC General Motors has acquired almost 23 billion yuan already in their first nine months before allocating 7.5 billion yuan for the new production line. The investment did come as a surprise as GM's China chief Matt Tsien has mentioned the expansion of operation before the end of first quarter.
Third Quarter Financial Result
Chuck Stevens, GM executive vice president and chief financial officer announced that the company can continue to achieve strong financial performance during the second quarter earnings conference call. Looking through the stock performance of GM for the last three months, the expectation of Mr. Stevens could be reasonable. As seen in the image below, the stock rallied from its upbeat second quarter results and remained in a steady range until the end of the third quarter.
From 28.63 at the start of July (1) , the stock climbed to $32.80(2) and settled at 31.88 (3) at the end of September. The range did not show a dramatic fall, but only minimal ones (4). The candles also stayed merely inside the band, with no major pull back or and with few instances of breaking the moving average (5). Also, after the high volatility last July, it was not followed by a narrow trading range.
According to Zacks Investment Research, the stock received a consensus EPS forecast of $1.44 for the third quarter, lower than the forecasted EPS in the same period last year. The FSM group of analyst expects the auto company to post $1.45 to $1.50 EPS and revenue ranging from $39 to $40 billion. On the other hand, the company currently has 50-day moving average of $31.75 and a 200-day moving average of $30.93 while its 12-month low is $26.69 and its 12-month high is $36.88.
Therefore, considering the positive outlook of for the third quarter earnings report and the series of investment it is making. The market interest for the stock will remain and the conclusion of the financial report will play a huge part in the steadiness of this trend. In general, a positive earnings data and announcements of investments and or partnership can push a specific stock higher.
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