GM: Great Quarter, Undervalued Shares
The auto giant’s upbeat quarterly report shows that the firm is starting to take advantage of its scale, writes Morningstar’s Dave Whiston.
GM North America had excellent results with adjusted EBIT margin increasing 230 basis points from the prior year’s quarter to a quarterly record 11.8%. This quarter marked the ninth consecutive year-over-year increase for GMNA margins with higher wholesales from midsize trucks and the new Chevrolet Trax small crossover driving margin improvement. Carryover pricing headwinds mostly offset about $400 million of favorable materials and logistics cost variances. We are especially encouraged to see management amend its 2015 GMNA margin guidance to be 10% from over 9% previously. It is very significant as well because 10% margin in GMNA had not been guided to happen until 2016 so management expects to meet its goal a full year early. We have long said that we found the 2016 GMNA margin guidance as conservative, so we remain very optimistic about the segment’s potential next year as GM introduces more new product to the market.
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