General Motors (GM 1.20%) will report its fourth-quarter and full-year 2019 earnings before the market opens on Wednesday, Feb. 5. What should auto investors expect?
What Wall Street expects
Analysts polled by Thomson Reuters expect GM to report adjusted earnings of $0.01 per share on $31.04 billion of revenue for the fourth quarter. Both of those figures would be down sharply from the fourth quarter of 2018, when GM posted adjusted earnings of $1.43 per share on $38.4 billion of revenue. (Adjusted earnings exclude the effects of one-time charges.)
How GM's sales fared in the fourth quarter of 2019
- GM's U.S. sales fell 6.3% in the fourth quarter.
- The United Auto Workers' nationwide strike, which shut down all of GM's U.S. factories from mid-September to late October, led to tight supplies of key models, including the big-selling Chevrolet Equinox crossover.
- Supply issues explained much of GM's U.S. sales decline.
- GM prioritized deliveries of well-optioned pickup trucks to retail buyers; to some extent, that probably helped offset the margin impact of the strike.
- GM's sales in China fell 13.3% in the fourth quarter.
- The sluggish Chinese economy, intense competition in mass-market segments, and some anti-American sentiment arising from the Trump administration's trade-war bluster were probably all factors in the decline.
- GM is in the midst of a product-line overhaul in China, which should boost margins even if the market remains slow.
Tight supplies drove a 6.3% U.S. sales decline for the Chevy Equinox in the fourth quarter. Image source: General Motors.
Why does Wall Street think GM's sales and earnings fell so much?
Wall Street -- like just about everyone else, including GM itself -- expects GM's fourth-quarter result to have been hurt by the UAW strike. That ongoing sales slump in China probably didn't help.
GM warned us that it would be a bleak quarter when it cut its full-year guidance in late October, right after the strike ended. That revised guidance calls for full-year adjusted earnings per share between $4.50 and $4.80.
Given that GM's adjusted earnings per share through the first three quarters of 2019 totaled $4.77, that revised range doesn't leave room for much of a profit.
What to expect from GM's earnings
Between the UAW strike and the ongoing China slump, GM was dealt a tough hand in the fourth quarter. That said, it appears to have taken some good steps to mitigate the impacts, including shuffling its truck deliveries to optimize profitability.
I think it's likely that GM will beat Wall Street's per-share estimate by at least a penny or two, and might beat it by enough to beat its own revised guidance from October. We'll find out when GM reports on Wednesday morning.
