GM Stock Gained on Fitch Ratings Upgrade

NEW YORK (TheStreet) -- GM (GM) shares closed trading up 0.22% to $36.19 on Monday after analysts at Fitch Ratings upgraded the company's rating to investment grade today, according to Bloomberg.

The company will now have a BBB- rating, the lowest investment grade Fitch gives out, after being upgraded by the firm for the first time since August 2012.

The firm believes that the company is improving its business and that GM will weather the storm from its ignition switch recall, according to Bloomberg.

Separately, today GM raised the official death toll from its ignition-switch recall to 117 from 114.

The families of the victims are being offered compensation of at least $1 million each for the faulty ignition-switch issue that caused the company to recall 2.6 million vehicles last year.

Insight from TheStreet's Research Team:

GM is a core holding of Jim Cramer's Actions Alert PLUS charitable trust. The stock was mentioned in the most recent weekly roundup of stocks from the portfolio, here is was Cramer and Jack Mohr had to say about the company.

We do not expect General Motors to agree to a merger with Fiat Chrysler (Fiat has reportedly been pursuing the automotive giant in recent weeks). In fact, we believe it makes more sense for Fiat to get its financial house in order before attempting another merger. Even more, a combination of Fiat and GM would present enormous challenges, chief of which would be how to reduce capacity in Italy and the U.S. where there would undoubtedly be tremendous resistance to any factory closures or headcount reduction. Economies of scale dry up fast when management is prohibited from rightsizing operations. Owing to the tremendous cost of overcoming the dealer and capacity challenges, we think economic profitability would be destroyed for several years to come.

-Jim Cramer and Jack Mohr, ' Weekly Roundup', 6/19/2015

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 multiple strengths, 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 6.9%. 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

More from Markets

Canopy Growth Lets Down Eager Pot Investors; PayPal Keeps Dominating -- ICYMI

Canopy Growth Lets Down Eager Pot Investors; PayPal Keeps Dominating -- ICYMI

Dow, S&P 500 and Nasdaq Tumble After Trump Calls Off North Korea Summit

Dow, S&P 500 and Nasdaq Tumble After Trump Calls Off North Korea Summit

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

3 Must Reads on the Market From TheStreet's Top Columnists

3 Must Reads on the Market From TheStreet's Top Columnists

Automakers Slump as Trump Tariffs Threaten Both Manufacturers and Consumers

Automakers Slump as Trump Tariffs Threaten Both Manufacturers and Consumers