Will GM Stock Be Helped by Selling China-Made Cars in the U.S.?
NEW YORK (TheStreet) -- General Motors (GM) - Get Report is planning to become the first major U.S. auto maker to sell China-made cars at home.
Beginning early next year, GM plans to sell the China-made Buick Envision in the U.S., sources told the Wall Street Journal. Buick crossovers are currently some of the best-selling cars on the market.
The auto maker will likely begin by importing just 30,000 to 40,000 of the SUVs per year.
GM officials have noted that the imports are not part of a cost-saving plan, but rather are meant to fill a gap in the company's product line, as U.S. demand for Buicks has rebounded recently, the Journal adds.
Even so, the Buick brand contributes to less than 7% of GM's volumes in the U.S., and fewer than 19,000 Buicks were sold here last month, according to the Journal. More than 100,000 Buicks were sold in China during the same period.
Importing vehicles from China might anger the United Auto Workers union, which gained approval for recent labor deals partly through U.S. production guarantees, the Journal notes. The union is unlikely to fight the plans, though.
Shares of GM are slumping by 0.87% to $35.24 in late afternoon trading on Thursday.
Separately, 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 a few notable 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 solid stock price performance, notable return on equity, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Automobiles industry and the overall market, GENERAL MOTORS CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Net operating cash flow has significantly increased by 204.04% to $3,308.00 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 10.18%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.0%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- GENERAL MOTORS CO's earnings per share improvement from the most recent quarter was slightly positive. 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 $1.64 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($4.79 versus $1.64).
- You can view the full analysis from the report here: GM
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.