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General Motors Profitable, but Stock Lags

By Tim Plaehn   |   Friday, 27 May 2011 11:03 AM

General Motors (GM) re-entered the stock market in November 2010, following the company's 2009 bankruptcy and government bailout. Since then the company has been strongly profitable and piling up cash. Yet, as of the end of May 2011, the stock trades below the IPO level.

For the first quarter of 2011 GM reported net income of $3.2 billion or $1.77 per share, up from $0.9 billion or 55 cents per share for the first quarter of 2010. However, included in the profits was a one-time gain of $1.9 billion from the sales of GM's interest in Delphi Automotive and Ally Financial.

Subtracting the one-time items, GM earned 95 cents per share, still a nice gain over the 2010 first quarter earnings. Revenues increased year-over-year 15 percent to $36.5 billion for the quarter.

Yet net income excluding one-time items lagged the results of Ford Motor (F), which earned $2.5 billion in the first quarter while selling fewer cars. GM is still chipping in more than $3,000 per car in incentives, reducing the net profit. The cure for high incentives is hot-selling cars and trucks, so GM must bring new, popular models to market.

An international brand

Growth prospects for General Motors focus on international sales. GM is the No. 2 selling brand in China with a 13 percent market share. China car sales are growing by 8 percent to 10 percent per year. GM sales in India increased 60 percent in 2010 along with an increase in market share, and General Motors is the top company in Brazil, with a fifth of the market. In the first quarter the India, Asia, and South America region contributed 17 percent of GM's earnings before interest and taxes.

Since the IPO, through the end of May 2011, the GM share price has dropped by 10 percent as the S&P 500 increased 10 percent. However, analysts following GM are upbeat on the stock, with two-thirds of the analysts following GM rating the stock as a buy.

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General Motors (GM) re-entered the stock market in November 2010, following the company's 2009 bankruptcy and government bailout. Since then the company has been strongly profitable and piling up cash. Yet, as of the end of May 2011, the stock trades below the IPO level....
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2011-03-27
 

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