GM Stock Closed Lower as it Recalls Another 243,000 Cars for Air Bag Problems

NEW YORK (TheStreet) -- Shares of General Motors Co.  (GM) closed down 0.25% to $26.11 on Friday as the company said it's adding more than 243,000 compact hatchbacks in the U.S. and Canada to its growing recall for air bag problems, the Associated Press reports.

The expanded recall for passenger air bags covers the Pontiac Vibe from 2003 through 2007, the company said.

GM's recall comes after Japan's Takata (TKTDY) in May doubled the size of its air bag inflator recall to 33.8 million, the largest in automotive recall in history, according to the AP. 

Additionally, there are talks that Fiat Chrysler Automobiles (FCAU) is looking to potentially merge with GM, as both companies have hired financial advisers to evaluate a potential deal, Reuters reported.

Bernstein analyst Max Warburton said the possibility of Fiat CEO Sergio Marchionne launching a "hostile takeover bid for GM," should be taken more seriously," USA Today reports.

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 increase in net income, impressive record of earnings per share growth, notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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 7.1%. 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

If you liked this article you might like

5 Auto Stocks to Buy After They Wrongly Crashed on Rising Interest Rate Fears

5 Auto Stocks to Buy After They Wrongly Crashed on Rising Interest Rate Fears

GM, Teva, Facebook and Other New Jana Partners Positions

GM, Teva, Facebook and Other New Jana Partners Positions

Amazon, AmerisourceBergen and Everything Else You Need to Know Before You Trade

Amazon, AmerisourceBergen and Everything Else You Need to Know Before You Trade

Walgreens, AmerisourceBergen, Amazon and GM - 5 Things You Must Know

Walgreens, AmerisourceBergen, Amazon and GM - 5 Things You Must Know

It Makes Sense That Ford Is Boosting Production of $70,000 Lincoln Navigator

It Makes Sense That Ford Is Boosting Production of $70,000 Lincoln Navigator