To say Monday’s release of auto sales figures for March was a letdown would be a considerable understatement. They were downright alarming, resulting in sizeable losses from stocks of industry stalwarts like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), as well as setbacks for shares of foreign favorites like Honda Motor Co Ltd (ADR) (NYSE:HMC) and Toyota Motor Corp (ADR) (NYSE:TM).
And why not? Auto sales have been suspiciously tepid of late, and although the “peak auto” chatter has faded, it has never really gone away.
Of the six key names that make up the vast majority of the United States automobile landscape though, one name continues to stand out as better than the rest. Keep GM stock on your watchlist, even if you have to take all the others off your radar of potential investments.
GM: Tough Month for Auto Sales
And it’s not as if the bar was set very high for most of these names. The pros were calling for Ford’s sales to plunge 5.9%, and the company couldn’t even do that — Ford sold 7.2% fewer automobiles than it did in March of 2016. Honda was expected to improve sales by nearly 5%, but instead posted a 0.7% decline. All told, five of the biggest eight names in the U.S. car business reported lower year-over-year sales.
The end result: The annualized pace of U.S. auto sales has fallen to 16.7 million, versus an expected advance to a 17.2 million unit clip.
The bullish case for the country’s automakers — and the nation’s preferred imports — is getting tougher and tougher to argue.
With the dust settling from yesterday’s lackluster March figures, though, General Motors has emerged as something of an exception to the norm. Indeed, the old-school Detroit icon may well be strong enough to keep GM stock buy-worthy even as the industry itself hits a wall.
General Motors Is Doing Something Right
Don’t read too much into the premise. Any of the problems other automakers are facing are sure to impact General Motors to some degree as well. The question is, can GM stock shrug those issues off, even if other names in the business can’t? The answer seems to be a qualified but well-founded “yes.” A handful of details from Monday’s data dump should keep General Motos stock relatively propped up.
Above all else, while GM stock may have missed growth expectations by a country mile, those expectations were unfairly high. Analysts were expecting a 7% increase in unit sales for the month. General Motors still mustered a 1.6% improvement in an environment that was quite tough for cars and trucks.
The compelling footnote in GM’s relative victory on Monday was that it didn’t come from truck sales.
A closer inspection of the recent red-hot automobile market reveals that pickup trucks rather than passenger sedans have been doing most of the driving since 2015.
While trucks (and SUVs) are more profitable for automobile companies, investors as well as the companies themselves were concerned about an over-reliance on light truck sales, and perhaps an inability to sell passenger vehicles. GM’s still got that magic touch with some sedan and crossover lines though. Sales of Chevy’s Equinix, Cruze and Camaro were all up, as were sales of Buick’s Regal, LaCrosse and Encore.
General Motors also partially soothed another worry some GM stock holders may have been entertaining … it doesn’t have to give buyers everything but the kitchen sink to get them to make a purchase. After being uncomfortably generous with car buyers in February, offering incentives/discounts of 14.9% of a vehicles’ purchase price, General Motors reeled that number in to only 13.5% last month. Yet, the carmaker sold 256,224 in the United States last month, up from February’s tally of 237,388.
Bottom Line for GM Stock
Again, being the top dog of the names at the bottom of the barrel doesn’t inherently mean much, as you’re still at the bottom of the barrel. General Motors is clearly doing something right that its peers and competitors aren’t though.
To the extent the fear that upended GM stock and all the other automaker stocks yesterday wasn’t fully deserved, GM shares should be the first to recover, and the best. In fact, yesterday’s selloff has already started to be undone today.
Clearly it’s not bulletproof, but GM should at least be noted as the best of breed, for when the time is right.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.