GM's December Sales Dip Offers Buying Opportunity, Analyst Says

DETROIT (TheStreet) -- General Motors (GM) shares rose 2% in a down market on Monday, as investors re-evaluated after selling off shares on Friday.

December sales for the auto industry, which were reported Friday, disappointed, and none disappointed more than GM. Overall sales rose just 0.3%. But GM sales dipped 6%, missing Bloomberg consensus for a 6% gain. Hopes for GM have been high, as shares rose 38% in 2013.

Shares dipped 3.4% to $39.57 on Friday. They closed Monday at $40.40, up 83 cents.

On Monday morning, JP Morgan analyst Ryan Brinkman called Friday's dip a buying opportunity for GM and reiterated his overweight rating. Brinkman said the shortfall was explainable by pricing discipline, including a reduction in less profitable fleet sales, and by the lower-than-expected industry sales. GM raised incentives just 3.6% in December, while the industry increase was 6.6% while Ford's (F) increase was 23.6%, according to AutoData. Brinkman cited "admirable pricing discipline which should benefit [GM] in the long run."

Regarding December pickup truck sales, incentives were apparently a key factor in the combined 9% decline for Silverado and GMC Sierra, while F-Series sales rose 13%, Brinkman said. According to Autodata, GM cut incentives 17% on Silverado and 19% on Sierra, while F-Series incentives rose 11%. "We think GM pickup truck market share will improve sequentially in the months ahead," he wrote.

Most experts attributed the industry's disappointing December performance to a pull-ahead of sales into November. "The month did start a little bit low on retail side of the biz," said Kurt McNeil, GM vice president of sales operations. "Some of that may have been payback from very well executed black Friday marketing campaign. Sales did pick up after Christmas." Added GM chief economist Mustafa Mohatarem: "There was a lot of activity in the industry in November. We had promotional play and took full advantage of that."

For the full year, U.S. light-vehicle sales totaled 15.6 million, up 7.6% for the year, marking the fourth consecutive year of sales gains.

Looking ahead, Sterne Agee analyst Michael Ward said he expects "the modest and steady recovery to continue in 2014 and into 2015, reaching 16 million and 16.5 million units, respectively." A steady improvement in demand, positive pricing and declining costs should enable record financial results for the auto sector."

Written by Ted Reed in Charlotte, N.C.

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