General Motors is one of the better earnings reports to read given their far-reaching global operations. Sales for GM are about 60% in North America, 15% in Europe, 15% in emerging markets (mostly China), and 10% in South America.
The company beat earnings expectations as North America continued to be a strong driver. U.S. pickup sales were higher than expected. Management was especially optimistic about the refreshed product lineup for the second half of the year. Interestingly, GM, Ford, and Chrysler all gained U.S. market shared in 1H 2013, which is especially impressive given the weakness in the yen (though the currency advantage for Japanese carmakers is mitigated by the fact that much of their U.S. production is located here anyways).
Europe, which has been the region of chronic trouble for GM, was more stable in the 2nd quarter. International operations outside of China were weaker than expected, and that’s where executives blamed competition from the Japanese carmakers due to a weaker yen.
Both GM and Ford have now reported strong results. Both stocks are now up more than 30% in 2013. While results have been good, the majority of the stock’s performance this year has been due to multiple expansion. But the valuation multiple for GM (and F) was very depressed in 2011 and 2012:
However, analysts are quite positive on earnings growth in 2014 and 2015, (around 20%-25% growth per annum expected for both companies). Performance going forward is going to be very tied to overall economic growth and demand.
GM stock is approaching its Jan 2011 highs at $39.48 (trading around $38 in the pre-market):
The strong uptrend over the last year continues after today’s strong results. Whether GM can break to new highs will give a good indication of investor demand for the auto sector heading into the fall.