GM Stock Falls on Weak China Sales

NEW YORK (TheStreet) -- General Motors Co. (GM) shares are down 0.83% to $35.64 in trading on Thursday after the U.S. automaker reported today a second consecutive month of sales declines in China.

The decline comes despite the company's decision to cut prices on 40 of its different vehicles in China, its largest market.

Sales for the quarter fell 4% year over year to 252,567 vehicles sold in May, a decline it blamed on changeover as the company phases out its older models.

Despite the weak May numbers, the company reported that over the first five months of the year the company had record retail sales of 1,472,186 vehicles, a 5.1% increase on an annual basis. 

"China's vehicle market continues to grow at a moderate pace. We expect about 6%-8% annual growth, which is significant given the size of the world's largest passenger vehicle market," said GM China President Matt Tsien.

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 increase in net income, impressive record of earnings per share growth, notable return on equity, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 343.7% when compared to the same quarter one year prior, rising from $213.00 million to $945.00 million.
  • GENERAL MOTORS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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 ($4.48 versus $1.64).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Automobiles industry and the overall market on the basis of return on equity, GENERAL MOTORS CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Even though the current debt-to-equity ratio is 1.33, it is still below the industry average, suggesting that this level of debt is acceptable within the Automobiles industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.79 is weak.
  • You can view the full analysis from the report here: GM Ratings Report

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