Please ensure Javascript is enabled for purposes of website accessibility

3 Key Numbers From General Motors' Earnings Report

By John Rosevear – Aug 1, 2019 at 6:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These are the numbers that tell the tale.

General Motors' (GM 1.56%) second-quarter results surprised investors -- and not in a bad way. Despite softer sales and a dip in revenue, GM managed to post adjusted earnings per share of $1.64, blowing away the Wall Street estimate of $1.43.

Not all of the news was good, of course. But GM managed enough good news to more than offset the challenges it's still facing. Here are three numbers from GM's second-quarter earnings report that together give a pretty clear picture of where the company stands right now.

10.7%: Margin in North America

GM reported "EBIT-adjusted" earnings of $3.02 billion in North America on revenue of $28.3 billion. ("EBIT-adjusted" is GM-speak for earnings before interest and tax, minus any one-time items.) That translates to a 10.7% margin, and that's a very strong number in the current market. It flat-out beat the margins reported for North America on a similar basis by GM's old Detroit rivals: Fiat Chrysler Automobiles (FCAU) checked in with an 8.9% result, while Ford Motor Company (F 2.14%) managed just 7.1%.

How did GM manage such strong profitability in a quarter in which its U.S. pickup-truck sales were down sharply, and in which it was still ramping up production of all-new pickup models?

A dark blue 2019 Chevrolet Silverado crew-cab pickup truck

GM is still working to get production of its all-new pickups up to full speed. But it's making crew-cab models in good numbers, and they've been getting great prices. Image source: General Motors.

First, while GM's overall pickup-truck sales were down, retail sales of highly profitable crew-cab versions of its all-new 2019 trucks -- the first variants to get up to full production speed -- were up 12% over sales of their crew-cab predecessors in the second quarter of 2018. While supplies are still tight, GM has been getting very good pricing for its all-new pickups, and each of those sales was quite profitable.

Second, GM's still selling lots of its recently revamped crossover SUVs, and it's making good money on those sales as well. U.S. sales of GM crossovers as a group were up 17% in the second quarter, a substantial gain.

So, while GM sold fewer vehicles in North America in the second quarter versus the year prior, those sales were considerably more profitable, on average.

$235 million: Equity income from China

GM sold almost 754,000 vehicles in China in the second quarter, which sounds impressive -- but that was down 12.2% from the second quarter of 2018. The decline clobbered GM's equity income from its joint ventures with Chinese automakers, which fell to just $235 million from $592 million in the year-ago period.

What happened?

There are two stories here. First, China's new-vehicle market is in a slump, and that slump is affecting most of the automakers that do business there. But there's an additional factor putting pressure on GM's results: Its product line is dated.

Now, that's probably not a big deal in the grand scheme of things, because GM has a bunch of new products set to launch in China in the second half of 2019. But in the second quarter, GM sold fewer vehicles than it might have otherwise, even after discounting prices.

Long story short: GM made fewer sales in China, and discounts hurt margins on the sales it did make.

18.3%: Cadillac sales increase

It hasn't received much attention, but GM's often-maligned Cadillac luxury brand had a great quarter. The brand's global sales rose 18.3% to 111,422 vehicles, driven by its recently expanded lineup of luxury crossovers.

An orange Cadillac XT4, a compact luxury crossover SUV, parked by a lake

The Cadillac XT4 has done well in the United States -- but it's doing great in China. Image source: General Motors.

Why is that story flying under the radar? It's because most of the growth is happening outside of the United States. Cadillac's U.S. sales were up just 1.1% in the second quarter, an unremarkable result. But in China, Cadillac sales grew 36.6% in the second quarter, thanks to high demand for the new XT4 compact luxury crossover and the freshly revised one-size-up XT5.

Given that GM is set to launch the larger Cadillac XT6 crossover in China in the third quarter, the growth streak might continue for a while.

John Rosevear owns shares of Ford and General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
$35.25 (1.56%) $0.54
Ford Motor Company Stock Quote
Ford Motor Company
$12.16 (2.14%) $0.26
Fiat Chrysler Automobiles N.V. Stock Quote
Fiat Chrysler Automobiles N.V.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.