Will GM Stock be Helped by Dismissal of Shareholder Lawsuit?

NEW YORK (TheStreet) -- General Motors (GM) shares are down 0.36% to $33.11 in afternoon trading on Tuesday despite a Delaware judge dismissing a shareholder lawsuit against the company.

The lawsuit accused the company's board of directors of not doing enough to prevent the financial fallout from the ignition switch recall that the company was embroiled in last year.

The company is still the subject of investigations and lawsuits tied to the ignition switch problem which resulted in 119 confirmed deaths and 234 injuries.

"The Delaware Court properly dismissed the complaint because GM's board of directors did its job in exercising oversight over the company," GM said in a statement, according to USA Today. ""The other shareholder derivative actions pending against the board make the same allegations, so we hope the courts will dismiss those as well."

The company still has three similar shareholder lawsuits pending in Michigan.

Insight from TheStreet research team

GM is a core holding of Jim Cramer's Action Alerts PLUS charitable trust and was recently the subject of a 'Weekly Roundup' blog post by Cramer and co-manager Jack Mohr. Here is what they had to say about GM:

The shares took a hit this week following a convincing downgrade from analysts at Goldman Sachs. Beyond this piece of negative news, industry analysts indicated this week that GM volumes should be up 7% in the first half of the year. With respect to market share, GM appears in line with its six-month trailing average of 18%. We are neutral on this name and although we like the cash optionality we would be remiss not to acknowledge how damaged the company's Latin American business has become.

-Jim Cramer and Jack Mohr,' Weekly Roundup', 6/26/2015

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 ($4.49 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 6.8%. 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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