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Shares of General Motors remained moderately steady in a tight range during the previous sessions. Following the disappointing earnings report, can the American multinational corporation reflect positive gains in the rest of the year?

The stock lost 0.03 percent to $31.53 before the week ended with a market capitalization of $48.88 billion. Previously, General Motors attained a dividend yield of 4.82 percent and price earnings ratio of 48.88 billion.

General Motors to Recall Vehicles

As the company disclosed its plan to recall around 368,000 vehicles, a downtrend for the stock is raised reflecting what happened last February. General Motors had the biggest decline this year after it recalled around 473,000 of trucks and SUV’s in Canada and United States. Although there had never been any reports of crashes or injuries that time, the stock traded at $26.90.

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Based on the statement from GM, the recent recall intends to fix a defective part which may stop the windshield wipers from working. The American company found out the safety hazard last year and conducted a series of investigation before coming up with a decision to recall this month.

As seen in the image below, the stock had a reversal at the start of the month (1) and then contracted after a huge volatility (2). Before the week ended, the stock moved beyond the moving average, which meant that the steady trend could end soon. In case the price would be pushed into the outer band, there would be a lack of power and it would move even lower.

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Potential Recovery

Despite the bearish call for the American auto company, there’s still a huge possibility that the price may touch the green line. The earnings report of the company would play a vital role in renewing the appetite of the investors for the stock. Considering the turn of events after its quarterly report in April, the stock hit its highest at $32.16.

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According to the first quarter earnings report of the company, it acquired $37.3 net revenue, higher than the $35.7 it acquired in the same period last year. It had $1.24 diluted earnings per share, away from the $0.56 last year. Chuck Stevens, GM executive vice president and chief financial officer indicated that the quarter was a great start to a year in which they anticipated strong growth in earnings and free cash flow.

Further to this, the company posted a better than expected earnings report for the second quarter.  General Motors disclosed a net income to common stockholders of $2.9 billion and earnings per share diluted of $1.81. The stock also managed to climb from $28.86 to $29.51, however, the gains were not sustained as it dropped to $27.51 at the end of July.

Chairman and CEO Mary Barra concluded that the second quarter was an outstanding period for the company after their strong retail sales in the U.S and record sales in China. As the company keeps its continuous effort to improve their performance globally, Ms. Barra said “We’ll continue to focus on driving profitable growth and leveraging our technical expertise to lead in the future of personal mobility.

Conclusion:

Currently, the stock has increased approximately 8 percent since the start of the year and has underperformed the S&P 500 by 7.69 percent.  GM has a great potential to continue this uptrend if the auto sales in August turn out to be positive. Last month, the company stated that it had 17.9 million vehicles sold on an annual basis, beating the analyst expectation of 17.6 million units.

The auto industry was partially affected by the market concerns in China and Japan in the previous quarter. Nevertheless, the company managed to show off better than expected results. This trend may continue in the long term, even though a short bearish stunt couldn’t be avoided as the company makes necessary corrections on its vehicles.

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