By Ben Klayman and Rachit Vats
DETROIT (Reuters) – General Motors Co <GM.N> reported a stronger-than-expected quarterly profit on Thursday, driven by renewed demand for trucks and SUVs in the United States and a rebound in China sales, sending its shares higher in premarket trading.
The 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 a global pandemic.
During a conference call early on Thursday, Chief Executive Mary Barra said the 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 global 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.
GM’s U.S. sales in the third quarter fell 10% due to the COVID-19 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.
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.
The company 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 <F.N> and Fiat Chrysler Automobiles <FCHA.MI> reported stronger-than-expected third-quarter earnings.
While GM beat consensus earnings forecasts, not all analysts were upbeat.
“We maintain a ‘Sell’ despite a much better-than-expected quarter and following the stock’s massive rebound from its March low, as we think Q3 represented a high water mark in terms of quarterly earnings for GM and risks related to its transition to an all-electric lineup in the coming years are significant,” CFRA analyst Garrett Nelson said.
GM shares jumped 5.6% to $37.24 in premarket trading.
(Reporting by Paul Lienert and Ben Klayman in Detroit and Rachit Vats in Bangalore; Editing by Bernadette Baum and Anil D’Silva)
The post GM profit beat driven by strength in trucks, SUVs and China rebound appeared first on Morningology.
