GM Surges On Another Positive Q3 Auto Report

The good week for automakers just keeps getting better.

Over the last several sessions, manufacturers have ridden positive tax news out of China and superior earnings out of Ford Motor Company F and Tesla Inc TSLA.

On Wednesday, General Motors Company GM capped the series with a significant earnings beat.

General Motors

GM’s $1.87 adjusted earnings per share far exceeded the Street’s $1.27 estimate. The beat was bolstered by tailwinds in domestic tax rates but muted by tariffs, which created $400 million in headwinds from commodities.

Despite the latter challenge, GM posted strength in China, where a richer mix drove record third-quarter equity income of $500 million. The foreign market nonetheless remains one of concern.

“We’ve had an intense focus on cost for the last several years there, and that cost discipline is really showing this quarter, as well,” CFO Dhivya Suryadevara said on CNBC. “We’ve had record Cadillac sales in China, and we’re up 20 percent year over year, and in an overall strong luxury market, Cadillac is doing exceptionally well. These factors are driving our performance in this backdrop, but it’s a backdrop that we’re certainly watching.”

While other international markets conceded about $400 million, GM Financial offset the loss with a record $500 million, and North America saw a 33-percent increase in earnings with a 10.2-percent profit margin.

Suryadevara attributed strength in average transaction prices to continued demand for full-sized pickups.

Industry Implications

GM’s report prompted an 8-percent pop premarket Wednesday, but Ford also moved on the news. The latter’s 2-percent rise compounded a 15-percent peak after its own earnings.

Last week, Ford reported a 10-percent Street beat in earnings before interest and tax, as well as 3-percent revenue growth and a marginal bottom-line beat.

In a generally unfavorable auto environment, challenged by aforementioned tariffs and expectations for continued sales declines, the strength among traditional manufacturers is certainly encouraging.

Related Links:

Mary Barra Hopes GM Will Be Considered A Tech Company In The Near Future

What China Means For Ford And Tesla