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TheStreet Open House

General Motors (GM) to Buy Back 120 Million Shares

NEW YORK (TheStreet) -- Automaker General Motors  (GM) announced it will repurchase 120 million shares of its preferred stock from the UAW Retiree Medical Benefits Trust for around $3.2 billion or $27 per share. General Motors will finance the repurchase through the offering of senior unsecured notes in 5, 10 and 30-year maturities.

Moody's Investors Service has upgraded General Motors from Ba1 to its investment grade rating of Baa3. Moody's said General Motors' new products in the US, increasing dominance in the Chinese automobile market, and commitments to maintain liquidity were prime factors for the upgrade.

"Good things happen when you build great cars and trucks and deliver strong financial results," General Motors Chairman and CEO Dan Akerson said in a company release. "Today's news from Moody's further underscores that this is exactly what we are doing today."

General Motors shares are down 0.03% to $36.82 as of 11:40 a.m. EST. The share price has remained close to its Friday close of $36.83. Overall, the company is outpacing the S&P 500 which is 0.54% lower.

TheStreet Ratings team rates General Motors as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation: "We rate General Motors a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GM's share price has jumped by 50.42%, exceeding the performance of the broader market during that same timeframe. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $4,893 million or 24.12% when compared to the same quarter last year. In addition, General Motors has also modestly surpassed the industry average cash flow growth rate of 18.31%.
  • The debt-to-equity ratio is somewhat low, currently at 0.7, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.

Written by Keris Alison Lahiff.

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