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General Motors (GM +0.00%) won't release its complete fourth-quarter and full-year 2018 earnings report until Feb. 6. But in a briefing for analysts last Friday, CFO Dhivya Suryadevara said that GM did better than expected in 2018 -- and it expects to do even better in 2019.
As recently as October, Suryadevara had given fairly conservative guidance for the full year. GM's adjusted earnings per share, she said, would come in "around $6.00," and its adjusted automotive free cash flow would be "around $4 billion." (She later clarified the guidance for adjusted earnings per share, saying that it would fall in a range between $5.80 and $6.20.)
Sales of the Chevrolet Equinox crossover rose 26.4% in the fourth quarter, helping GM's earnings per share to come in higher than expected. Image source: General Motors.
The bad news was that both of those reflected declines from 2017, when GM's adjusted earnings per share hit $6.62 and its adjusted automotive free cash flow was $5.2 billion. ("Adjusted" figures exclude the effects of one-time items; "automotive" figures exclude results related to subsidiaries GM Financial and Cruise Automation.)
But the good news, Suryadevara said last week, is that the company did somewhat better than it had expected. While GM's results weren't yet final, she said she expected adjusted earnings per share to "exceed the high end of the range" and adjusted automotive free cash flow to be higher than $4 billion.
Misses to the upside aren't bad, but how did GM blow past its own guidance? "Strength across every operating segment" in the fourth quarter. The automaker finished strong in both the U.S. and China in the fourth quarter, despite the slumping Chinese market, and GM Financial also performed well, Suryadevara said.
Suryadevara said that GM expects that strong performance to continue in 2019. But, she said, the company's ability to generate profits will face both "headwinds and tailwinds" in 2019.
"Tailwinds" (things that will help boost earnings):
Against that are some "headwinds," or things that will tend to reduce profits:
The upshot of all that? Suryadevara said that despite the headwinds, GM believes the tailwinds will make 2019 a good year: The company expects its 2019 adjusted earnings per share to come in between $6.50 and $7.00, with adjusted automotive free cash flow between $4.5 billion and $6 billion.
Check out the latest GM earnings call transcript.