This week marked the continuation of a couple of trends within the automotive industry. First, General Motors (NYSE:GM) continued the trend of Detroit automakers' posting of strong profits thanks to high sales of SUVs and full-size trucks during 2015. GM's EBIT-adjusted figure reached $2.8 billion during the fourth quarter, which was a record fourth-quarter performance and helped drive a record full-year EBIT-adjusted number of $10.8 billion.
The other trend that continued today was that Wall Street continues to despise automotive stocks, despite record profits, and General Motors' stock price promptly declined about 4% during the company's conference call. Let's dig into some of the fourth-quarter and full-year highlights.
Starting from the top
General Motors' global deliveries increased 4.4% during the fourth quarter thanks to retail sales that increased 14.2% in China and deliveries that rose 8.6% in North America. That would have equated to a $2.4 billion increase in GM's top-line global revenue during the fourth quarter, except it was offset by unfavorable foreign currency exchange -- GM's fourth-quarter revenue was flat year over year at $39.6 billion.
For the full year, the negative net foreign currency exchange impact was a whopping $9.3 billion, bringing GM's full-year revenue to $152.4 billion from 2014's $155.9 billion. However, holding exchange rates constant, GM's net revenue in 2015 would have increased by $5.8 billion over 2014 levels.
As previously mentioned, GM's fourth-quarter EBIT-adjusted number was a record $2.8 billion, driven by an EBIT-adjusted margin of 7%, which was also a fourth-quarter record. Excluding one-time items, GM's diluted earnings per share checked in with a 17% increase to $1.39 during the fourth-quarter, which was far stronger than the average analyst estimates of $1.20 compiled by Bloomberg.
Even better for investors is that GM continues to return value to shareholders. GM handed over roughly $5.7 billion to shareholders in 2015 -- $3.5 billion from its share repurchase program and $2.2 billion in common stock dividends.
GM also remained on track to generate roughly $5.5 billion of efficiencies by 2018, and management noted that it achieved non-raw-material and logistics cost savings in excess of $2 billion last year. It's important for investors to keep an eye on this, as the savings are expected to offset brand and technology investments going forward.
Beyond the numbers
Looking past the quarterly figures, which were certainly strong, GM's four brands performed well globally. Chevrolet grew its retail share faster than any other full-line automotive brand in the U.S. in 2015, with retail sales increasing 9%. General Motors also regained its No. 1 position in China, with retail sales increasing 5% to a record 3.6 million units last year. Cadillac sales managed to post an 8% sales gain globally last year, compared with 2014, driven by strength in its two critical markets: the U.S. and China. Lastly, Buick set its global sales record for the third consecutive year, partly driven by selling a record number of crossovers in the U.S. market.
Despite posting a solid fourth-quarter and extremely strong full-year results, the market refuses to give any love to GM, or any automotive stock for that matter. That's primarily because investors are concerned that new vehicle sales in North America are peaking, and since North America drives the profits for automakers, it's a primary concern.
With that said, perhaps the most important takeaway from GM's fourth-quarter presentation was its argument that sales in North America could plateau at strong levels for years, similar to what happened in the early 2000s, rather than peak and decline significantly. GM suggests that a plateau of around 17 million vehicles annually would create a very healthy industry that would continue to drive high profitability in the years ahead.
Only time will tell, but hopefully for automotive investors, GM's plateau argument proves true and automakers begin to trade at more respectable multiples during this era of record-setting profitability.