NEW YORK (TheStreet) -- Shares of General Motors (GM) - Get General Motors Company Report are down -2.10% to $34.99 on heavy trading volume as the fallout from yesterday's earnings report continues to affect the company.
GM reported second quarter profit that missed analyst estimates, and said it will spend at least $400 million to pay victims of the 2.59 million compact cars with a potentially faulty ignition switch linked to at least 13 deaths.
Profit, excluding one-time items, was 58 cents a share, versus an average estimate of 59 cents from 14 analysts, according to Bloomberg data.
The automaker reported earning 84 cents on that basis a year earlier, Bloomberg noted.
While GM took a one-time charge of $400 million for the victim compensation program, the automaker said it may jump to $600 million.
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 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, 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:
- GM's revenue growth trails the industry average of 22.2%. 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 42.27%.
- 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 ($2.87 versus $2.35).
- In its most recent trading session, GM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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