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General Motors Stock Is Stalled (GM)

Earnings continue to fall while sales growth struggles


Welcome to the Stock of the Day.

General Motors NYSE:GMAutomaker General Motors (GM) can’t seem to cut a break. First, word got out that General Motors would need to recall 1.3 million vehicles to fix power steering issues.

Tuesday the company delayed its March U.S. sales report by several hours due to computer issues. Can the automaker shift itself out of this rut?Find out today.

Company Profile

Once a global institution, General Motors is an American carmaker whose roots stem back to 1908. General Motors is behind household car names like Cadillac, Chevrolet and GMC in the United States as well as Opel and Vauxhall in Europe.

Currently, the company employs just over 210,000 worldwide and operates in just under 160 countries. Income seekers may note that GM pays a 3.44% dividend, but I don’t consider that enough of a reason to buy shares now.

Earnings Preview

General Motors is scheduled to release first-quarter earnings on April 24. Right now, analysts are calling for 50 cents EPS on $38.18 billion in sales. Compared with Q1 2013 this translates to 3.5% sales growth and a 25% drop in earnings. Ouch!

To add insult to injury, the consensus earnings estimate has plunged 54 cents per share, or by 52% over the past three months. That’s partly because the company will take a charge of up to $750 million in the first quarter to cover the cost of recalling 1.3 million vehicles to fix power steering issues in the U.S. This is a big red flag that GM will likely miss estimates in its upcoming earnings report.

Current Ratings

Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. It has been a bumpy ride for General Motors stock for the past six months. After climbing to a B-rated buy during the summer months, GM fell back to a D-rated Sell. GM currently receives a D for its Quantitative Grade, indicating a poor risk-to-return ratio.

That’s because the company is still struggling in terms of its fundamentals, especially earnings surprises and analyst earrings revisions (Fs), operating margin growth (D), and sales and earnings growth (Cs). GM receives a D for its Fundamental Grade.

Bottom Line: As of this posting I consider General Motors stock a D-rated Sell.

Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!

Article printed from InvestorPlace Media,

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