DETROIT (TheStreet) -- GM (GM) had what can be viewed as a disastrous day on Monday, It recalled 8.4 million vehicles, bringing the year's total to 29 million recalls. Details of a compensation plan also were announced, adding an estimated $300 million to GM costs.
But on Tuesday, GM announced surprisingly strong June sales results. Sales rose 1%, despite forecasts that they would show a decline in the mid-single digits. This occurred even as sales of the Cruze, GM's most popular car and second most popular vehicle after the Silverado, were halted on June 26 because of a potential air bag defect.
GM shares rose 2.8% to $37.33 on Tuesday.
The success of GM's redesigned full-sized SUVs "is driving up GM's average transaction price even as overall sales grow," said Kelley Blue Book analyst Karl Brauer, in a prepared statement. "The result is a GM at pre-recession health levels, recalls be damned."
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Is GM now a Teflon company, loved by consumers despite what the news reports say? That seems hard to believe, given that not long ago the specter of "Government Motors," bailed out by the federal government, was a staple talking point for the Obama haters. But that was seemingly forgotten on Tuesday.
Perhaps this is simply a case in which a rising tide lifts all boats. Overall, 2014 GM sales are up 2.5% through June while industry sales were up 5% through May. But GM has some bigger winners. Year to date, Chevrolet's small cars -- Cruze, Spark, and Sonic -- gained a combined 11% to 218,027 sales. Buick sales rose 12.5% to 113,472 units.
Written by Ted Reed in Charlotte, N.C. To contact this writer, click here
WATCH: More market update videos on TheStreet TV 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.
- You can view the full analysis from the report here: GM Ratings Report
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