General Motors (GM +1.23%) said on Aug. 1 that its second-quarter net income rose 1.6% from a year ago, to $2.4 billion, on cost savings and good early results for its all-new pickup trucks in North America.
Excluding one-time items, GM earned $1.64 per share, well ahead of the $1.43-per-share average estimate from Wall Street analysts polled by Thomson Reuters. Revenue of $36.06 billion was roughly in line with Wall Street's $36.11 billion consensus estimate.
GM shares opened about 2.5% higher after the results were announced.
GM's all-new pickups were in tight supply in the second quarter, but the ones that reached dealers sold at very good prices, helping GM to a strong profit margin in North America. Image source: General Motors.
The raw numbers
| Metric | Q2 2019 | Change (YOY) |
|---|---|---|
| Revenue | $36.1 billion | (1.9%) |
| Global deliveries | 1.94 million | (6.1%) |
| EBIT-adjusted | $3.0 billion | (5.6%) |
| EBIT-adjusted margin | 8.4% | 0.3 ppts lower |
| Net income | $2.4 billion | 1.6% |
| Adjusted earnings per share | $1.64 | (9.4%) |
| Automotive operating cash flow | $3.8 billion | (5%) |
Data source: General Motors. YOY = year over year. "EBIT-adjusted" is GM's non-GAAP expression of EBIT (earnings before interest and tax) minus one-time items and with some other small adjustments. "Automotive operating cash flow" excludes results related to GM's captive-financing subsidiary. "Ppts" = percentage points.
What happened at GM in the second quarter?
- GM North America's EBIT-adjusted rose 13.2% from the second quarter of 2018, to $3.02 billion, despite a 5.7% decline in wholesale shipments. GM's all-new pickups, while still in tight supply, are selling at higher margins than their predecessors did a year ago. That plus continued strong demand for GM's profitable crossover SUVs drove the gains.
- GM North America's EBIT-adjusted margin, a widely watched number, rose to an impressive 10.7% in the second quarter from 9.4% a year ago.
- GM International posted an EBIT-adjusted loss of $48 million versus a $143 million profit in the year-ago period. GM is restructuring in South Korea and South America and dealing with ongoing market weakness in China.
- GM's equity income from its joint ventures with Chinese automakers fell to $235 million from $592 million a year ago. GM is preparing to launch several all-new models in China in the second half of 2019; sales of some outgoing models were weak in the second quarter.
- GM Cruise, the company's self-driving subsidiary, posted an EBIT-adjusted loss of $279 million versus a loss of $154 million a year ago. Cruise is continuing to make progress toward the launch of a self-driving taxi service, but GM said recently that the launch will probably not happen in 2019.
- GM Financial, the company's captive-financing arm, generated adjusted pre-tax profit of $536 million, unchanged from a year ago. The unit captured 45% of GM retail sales in the quarter, also unchanged from a year ago, but credit metrics improved slightly year over year.
Special items, debt, and liquidity
GM had two one-time items in the second quarter: a charge of $361 million for restructuring actions and a credit of $380 million for a favorable tax decision in Brazil. The net credit of $19 million compares with a net charge of $196 million in the year-ago period.
As of June 30, 2019, GM had $17.5 billion in cash available to its automotive business and an additional $16.5 billion in available credit lines for total liquidity of $34 billion. That was up slightly from $33.8 billion at the end of 2018.
Against that, GM had $15.4 billion in well-structured long-term debt as of June 30, up a bit from $14.0 billion at the end of 2018.
Looking ahead
CFO Dhivya Suryadevara again reiterated the upbeat guidance that GM gave in January. For the full year, the company still expects its adjusted earnings per share to come in between $6.50 and $7.00, with adjusted automotive free cash flow between $4.5 billion and $6.0 billion.
