Will GM Stock Gain on UAW Contract Ratification? - TheStreet

NEW YORK (TheStreet) -- The United Auto Workers union ratified a four-year contract with General Motors Co. (GM) - Get Report on Friday afternoon after the agreement was initially rejected by some workers.

The UAW's International Executive Board ratified the agreement after changes were made to the contract to protect core trades classifications and seniority rights.

The contract was ratified by 55.4% of union members earlier this month, but 59.5% of skilled trade workers voted against the agreement because of concerns over the seniority rights and classifications.

As part of the agreement, GM will invest $1.9 billion to secure and create 3,300 jobs over the next four years.

Workers will receive an $8,000 signing bonus for ratifying the contract, as well as a 3% pay increase in the first and third year of the contract.

"We believe this agreement gives UAW-GM members significant raises and stronger benefits that protect income security and job security," UAW President Dennis Williams said in a statement.

GM stock is declining 0.36% to $36.21 in midday trading on Monday.

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 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 notable return on equity, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel its 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:

  • 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 12.35%.
  • 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, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • 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 ($4.78 versus $1.64).
  • GM, with its decline in revenue, underperformed when compared the industry average of 9.4%. 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.
  • 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.