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General Motors (GM) Plans Smaller Engine For 2.5 Million Cars By 2017

Stocks in this article: GM

NEW YORK (TheStreet) -- General Motors GM announced Wednesday that is plans to build 2.5 million "Ecotec" engines to power 27 models by the 2017 model year.

Shares of GM fell 0.7% to $34.92.

GM expects the smaller, efficient engine type will be in 25% of all vehicles it sells across several segments including minicars, mid-sized cars, and crossovers. The Ecotec engine will be more cost-effective for the automaker as it builds to scale. There are 11 different models included in the new line of engines, all based on the same design. 

GM's current most often use engine is a 3.6-liter engine used in between 800,000 and 1 million cars and crossovers every year.

The automaker will split production of the new Ecotec engine between plants in the U.S., China, Hungary, South Korea, and Mexico. 

TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by some important positives, 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, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 291.54% to $3,058.00 million when compared to the same quarter last year. In addition, GENERAL MOTORS CO has also vastly surpassed the industry average cash flow growth rate of 29.69%.
  • The debt-to-equity ratio is somewhat low, currently at 0.85, 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 0.85 is somewhat weak and could be cause for future problems.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • GENERAL MOTORS CO has improved earnings per share by 5.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENERAL MOTORS CO reported lower earnings of $2.35 versus $2.93 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus $2.35).

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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