GM beats second-quarter estimates
DETROIT (Reuters) - General Motors Corp. (GM.N) on Tuesday said it swung to a quarterly profit that trounced Wall Street estimates as it benefited from cost-cutting and growing sales overseas, sending its shares higher.
GM posted a second-quarter profit of $891 million against a massive $3.4-billion loss a year ago, bolstered by gains in Europe, Latin America and Asia, sales of higher-margin vehicles and a one-time, tax-related gain.
The automaker also sharply narrowed its losses in its troubled home market, but vowed to keep the pressure on costs, the overriding issue in a crucial round of ongoing labor talks with its major union.
Despite signs of recovery for the No. 1 U.S. automaker, analysts said GM would face a tough second half as stiff competition and a weak U.S. housing market raise the stakes for automakers to roll out new sales incentives.
Shares of GM were up 1 percent at $32.91 in afternoon trade on the New York Stock Exchange, off early gains that sent the shares up as much as 6 percent.
Excluding some one-time items such as charges related to the bankruptcy of parts supplier and former subsidiary Delphi Corp. (DPHIQ.PK), GM said it had earned $2.48 per share.
Those adjusted earnings included 19 cents per share in earnings from subsidiary Allison Transmission, which GM is spinning off in a deal expected to close this quarter. The headline figure also included a $401-million gain as GM reversed previously booked tax liabilities.
But even stripping out those items, analysts said GM beat both the average Wall Street forecast of $1.08 per share and the most bullish forecast at $1.64 per share, as tracked by Reuters Estimates.
"While never an easy release to navigate, it appears to be a clean beat," Bear Stearns analyst Peter Nesvold said.
Lehman Brothers analyst Brian Johnson attributed GM's stronger-than-expected showing to a better performance at GMAC -- its former finance arm in which it retains a 49-percent stake -- and strong earnings in markets outside North America.
Overall revenue from auto operations rose to $45.9 billion, up nearly 2.5 percent from $44.8 billion a year earlier.
GM, which had lost more than $12 billion in the past two years, is in the middle of a sweeping restructuring that includes slashing more than 34,000 jobs and closing 12 plants in North America.
For the second quarter, GM's North American net loss narrowed sharply to $39 million from $3.95 billion a year earlier when it took charges for its attrition plan.
CFO: KEEP THE PRESSURE ON COST-CUTTING
GM Chief Financial Officer Fritz Henderson said GM needed to keep up the pressure on cost-cutting, including taking steps to reduce its $4.8 billion annual health care bill. Continued...
