Why General Motors (GM) Stock Is Down Today (Update)

Update (3:15 p.m.): Updated with current market price information.

NEW YORK (TheStreet) -- General Motors  (GM) fell Tuesday after the top U.S. automaker announced yet another vehicle recall.

The company announced a recall of 2.42 million vehicles in the U.S., which increases the total of GM vehicles recalled this year to more than 15 million. GM also said it would double the charge it expects to take in the second quarter to approximately $400 million, primarily due to repairs related to recalls.

GM said four recalls cover this latest round of affected vehicles. This increases the number of U.S. recalls this year to 29, including the much-publicized recall of 2.6 million vehicles to correct defective ignition switches tied to at least 13 deaths. The automaker said there have been no fatalities associated with the latest recalls.

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The breakdown of the four recalls is as follows:

1) 1.34 million 2009 to 2014 Buick Enclave, Chevrolet Traverse and GMC Acadia full-size crossovers and 2009 to 2010 Saturn Outlooks for a potential front safety lap belt issue.

2) 1.075 million 2004 to 2008 Chevrolet Malibus for a transmission cable concern.

3) 1,400 2015 Cadillac Escalades and Escalade ESVs for a heated plastic weld connected to the passenger side air bag.

4) 58 2015 Chevrolet Silverados and GMC Sierra pickups for an isolated issue related to retention clips.

The stock was down 3.3% to $33.12 at 3:13 p.m.

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 several positive factors, 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 23.3%. 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 43.50%.
  • 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 ($3.17 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

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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