Car maker has enough cash to weather a downturn, analysts say
Wall Street is underestimating the “large immediate” savings General Motors Co. will garner from its sweeping restructuring plan this year and the next.
That’s from analysts at Deutsche Bank in a note Thursday. The analysts, led by Emmanuel Rosner, kept their buy rating on GM GM, +0.26% stock and raised their price target on the shares by $4 to $48, which represents a 25% upside over Thursday prices.
GM ended 2018 strong, making its 2019 earnings and free cash flow targets even more credible, the Deutsche analysts said.
“Besides strong expected volume/price/mix contribution from its new U.S. trucks, GM should benefit from large immediate savings from its restructuring efforts, which we believe are underestimated by investors, and that will continue to ramp up through 2020,” they said.
GM earlier this week reported fourth-quarter adjusted EPS of $1.43 on sales of $38.4 billion, thanks to North America operations and lower spending at Cruise, its driverless-car unit, offset by China weakness and a higher tax rate.
Analysts polled by FactSet had expected adjusted profit of $1.28 a share on sales of $36 billion.
The Deutsche Bank analysts also raised its per-share earnings estimate for the year to $6.75 from $6.65 “as we give GM credit for ($2 billion) in restructuring savings and better U.S. truck mix contribution,” they said.
Beyond 2019, GM is on a path to “materially higher free cash flow” as it reaps more benefits from the restructuring and reduces capital expenses.
“This should enable it to keep generating cash in the event of a pronounced downturn,” the analysts said.
GM shares have lost 9% in the past 12 months, narrower losses than Tesla Inc.’sTSLA, +2.27% 11% and Ford Motor Co.’s F, +0.24% 22% in the same period and in contrast with gains around 0.5% for the S&P 500 index SPX, +0.07%