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Earnings preview: Not an easy ride for General Motors in Q2

General Motors Company (NYSE: GM) is set to release its earnings results for the second quarter of 2019 on Thursday before the market opens. The results will be hurt by the 1.5% decline in deliveries due to lower passenger car sales despite an increase in truck and crossover deliveries. Also, higher costs and expenses could hurt the bottom line.

The company is increasing levels of vehicle electrification including eAssist, plug-in hybrid, full hybrid, extended range, and zero-emission battery electric vehicles that are part of a long-term strategy to lower petroleum consumption and GHG emissions. The company continues to develop plug-in hybrid electric vehicle technology and extended-range electric vehicles such as the Chevrolet Bolt EV.

GM is actively testing autonomous vehicles. The driver assistance technology, Super Cruise, which enables hands-free driving on the highway, would be expanded to all Cadillac models with rollout beginning in 2020. The company sees autonomous technology leading to a future of zero crashes, zero emissions and zero congestion since more than 90% of crashes are caused by driver error, according to the National Highway Traffic Safety Administration (NHTSA).

Photo Courtesy: General Motors

The company believes alternative fuels offer significant potential to reduce petroleum consumption and resulting in GHG emissions in the transportation sector. General Motors continues to develop FlexFuel vehicles that can run on ethanol-gasoline blend fuels as well as technologies that support compressed natural gas and liquefied petroleum gas (LPG).

The company, which builds, and sells cars, trucks, crossovers, and automobile parts worldwide, delivered 746,659 vehicles in the US in the second quarter of 2019. This was down 1.5% versus a year ago, in line with third-party estimates for industry sales. The company’s end of June inventory was 809,387 units, up about 22,000 units year over year, reflecting new model launches.

Analysts expect the company’s earnings to drop by 21% to $1.43 per share and revenue will decline by 1.80% to $36.11 billion for the second quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

Also read: Shopify Q2 earnings preview

For the first quarter, General Motors reported a 93% jump in earnings backed by a decline in costs and expenses despite a 3.4% decrease in revenue. The top line was factored by the weak demand for passenger vehicles. However, the auto industry remained favorable from the general macro environment backed by improving economy and strong labor market.

For the full year 2019, GM continues to expect adjusted earnings in the range of $6.50 to $7.00 per share and adjusted automotive free cash flow in the range of $4.5 billion to $6 billion. The company remained on track for the execution of transformation cost savings of $2 billion to $2.5 billion through 2019. Earnings are anticipated to be $5.76 to $6.79 per share.

During last week, GM’s rival Ford Motor (NYSE: F) reported a 86% dip in earnings for the second quarter of 2019 as a result of ongoing global redesign and restructuring activities, primarily in Europe and South America. The results missed analysts’ expectations. Ford guided full-year 2019 adjusted earnings below consensus estimates.

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