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GM Surprises With 1% Sales Gain in June but Ford Sales Drop 6%

Detroit (TheStreet) -- Auto sales in June were surprisingly strong, as the month had two fewer selling days than June 2013 and GM (GM) faced widely publicized problems, including a massive recall.

GM, which had been expected to show a sales decline, reported Wednesday that sales for the month rose 1%. Chrysler sales rose 9%. Ford (F) sales fell 6%.

GM and Chrysler both reported their best June since 2007. Also, Chrysler projected the June seasonally adjusted light-vehicle annual sales rate to be 17 million, surpassing even the most optimistic forecast issued in the last week of June. GM said Wednesday that the SAAR was 16.6 million. In any case, the SAAR was above 16 million for the fourth consecutive month.

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GM delivered 267,461 vehicles. Retail sales rose 1% and fleet sales rose 2%. GM said that on a selling-day adjusted basis, a rarely used measure, its sales rose 9% and retail sales rose 9%.

"June was the third very strong month in a row for GM, with every brand up on a selling-day adjusted basis," said Kurt McNeil, U.S. vice president of sales operations, in a prepared statement. "In fact, the first half of the year was our best retail sales performance since 2008, driven by an outstanding second quarter."

Sales of the Cruze, halted in the last week of June, fell 21% to 26,008. Silverado sales gained 0.6% to 43,519.

GM's said its commercial fleet business posted its eighth consecutive monthly increase for the best June since 2007. "It's clear that our commercial and small business customers are expecting a strong second half of the year and they are building their fleets to meet demand," McNeil said.

Ford said sales totaled 222,064 vehicles, with retail sales down 5% and fleet sales down 7%. Nevertheless, Fusion had its best June ever, with sales of 27,064, up 14% from the same month a year earlier. Fusion retail sales rose 22% including a 24% sales gain in the west.

"Both the Fusion and Transit Connect set records in June, continuing their sales momentum," said John Felice, Ford vice president, U.S. marketing, sales and service, in a prepared statement. "F-Series again topped 60,000 sales and is tracking to our inventory plan with the lowest incentives among the major players in the segment."

Focus sales rose 13.5% to 26,266. But Escape sales fell 12.5% to 25,110 and F-Series sales fell 11% to 60,560. Also, Lincoln sales fell 2.7% to 7,271 as the new MKC began to arrive in showrooms.

Chrysler said sales totaled 171,086 vehicles, its best June sales total since 2007.

"In spite of two fewer selling days in June vs. a year ago, we were able to increase our sales 9% and post our strongest June sales in seven years," said Reid Bigland, Chrysler head of U.S. sales, in a prepared statement.

"Month-over-month sales of our all-new Chrysler 200 increased from a few hundred units in May to more than 5,000 in June as inventory of the mid-size sedan continues to build. In addition, sales of the Jeep brand increased 28% and our Ram Truck brand 14% helping to lead Chrysler Group to its 51st-consecutive month of year-over-year sales growth." 

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 and increase in stock price during the past year. 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:

  • GM's revenue growth trails the industry average of 20.9%. Since the same quarter one year prior, revenues slightly increased by 1.4%. 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.
  • Net operating cash flow has significantly increased by 141.26% to $1,976.00 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 40.62%.
  • The debt-to-equity ratio is somewhat low, currently at 0.89, 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 0.81 is somewhat weak and could be cause for future problems.
  • GENERAL MOTORS CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over 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 ($3.13 versus $2.35).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.

Written by Ted Reed in Charlotte, N.C.

To contact this writer,
click here.

Follow @tedreednc

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