Image source: General Motors earnings presentation, Nov. 5, 2020
By Ben Klayman, Rachit Vats
(Reuters) – General Motors Co posted a stronger-than-expected quarterly profit on Thursday, driven by renewed demand for trucks and SUVs in the United States and China sales, sending its shares higher.
The Detroit company also said it would generate cash flow of $7 billion to $9 billion during the second half of the year, as sales in its two largest markets recovered more quickly than anticipated during the global coronavirus pandemic.
GM Chief Executive Mary Barra said on a conference call with reporters that results were driven by “the faster and stronger-than-expected industry recovery in the U.S. and China, and strong U.S. retail sales, market share and average transaction prices, especially with pickups.”
Given the economic uncertainty over the impact of the pandemic and a U.S. presidential election, Barra added: “There are a lot of moving pieces right now, but we’re hopeful that we’ll continue to have a strong recovery” in the fourth quarter.
She said uncertainty over the outcome of the presidential election had been expected and cited greater concern over spiking coronavirus cases in the United States.
GM’s U.S. sales in the third quarter fell 10% due to the pandemic, but results improved each month. In China, GM’s sales in the quarter rose 12%, its first quarterly sales growth in two years.
The Detroit automaker reported net income of $4 billion, or $2.78 a share in the quarter, compared with $2.35 billion, or $1.60 a share, a year earlier.
Excluding one-time items, GM earned $2.83 a share, above the $1.38 a share expected by analysts, according to IBES data from Refinitiv. Barra said third-quarter results were typically stronger than the fourth quarter.
The company’s EBIT-adjusted margin in North America jumped 6.5 points to 14.9% in the quarter, reflecting the strength of its high-margin pickups and SUVs.
GM repaid $5.2 billion of its revolving credit facilities during the third quarter, and an additional $3.9 billion in October.
It expects to repay the balance by year-end while maintaining a strong cash balance. It ended the quarter with $37.8 billion in liquidity.
Earlier, both Ford Motor Co and Fiat Chrysler Automobiles reported stronger-than-expected third-quarter earnings.
Barra said GM remained in talks with electric and fuel cell vehicle maker Nikola Corp, but a deal to build EV pickups and supply fuel cells to the startup had not been finalized.
GM shares are up 2.4% in mid-morning trading.
Reporting by Paul Lienert and Ben Klayman in Detroit and Rachit Vats in Bangalore; Editing by Bernadette Baum.