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General Motors Reaches New 52-Week High

Zacks Equity Research

Shares of General Motors Company (GM) hit new 52-week high of $32.44 on May 3, which is above its previous level of $31.08, and closed at $32.10 on the same date. Their last closing price was $31.82, which represented a solid one-year return of 42.0% and year-to-date return of 9.2%.

The world’s second largest automaker (by sales volume) has a market cap of $43.9 billion. Average volume of shares traded over the last three months stood at approximately 11,149.1K.

Shares of the company started escalating following its announcement of revival plan in Europe and U.S. Treasury department’s announcement of selling a significant stake in the company.

Last month, Chairman and CEO of GM, Dan Akerson, promised to invest €4 billion ($5.2 billion) in its European opeartion Opel without revealing any plan to close down plants or other specific measures in order to boost earnings. Opel plans to launch 23 new models and 13 new engines within 2016 and develop a small car platform with French partner PSA Peugeot Citroen (PEUGY).

In the same month, the Treasury Department revealed that it sold $621 million worth of GM common stock in March, recovering $30.4 billion of the $49.5 billion bailout fund received by GM.

GM reported a 28.0% fall in earnings to 67 cents per share in the first quarter of the year from 93 cents in the same quarter of 2012 (all excluding special items) due to lower earnings generated from the company’s all geographic operations except Europe. Despite this, the automaker’s earnings exceeded the Zacks Consensus Estimate by 11 cents per share.

Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6% rise in retail unit sales to 2.4 million vehicles globally. Nevertheless, it was higher than the Zacks Consensus Estimate of $36.4 billion.

General Motors is gearing up for more than 40 major vehicle launches in 2013 across the globe in order to drive sales and revenues. In addition, the company expects that its European results will improve further based on its cost reduction measures.

GM’s archrival Ford Motor Co. (F) posted an increase of 4.1% in earnings to $1.6 billion and 5.1% in earnings per share to 41 cents in the first quarter of 2013, beating the Zacks Consensus Estimate by 3 cents. Revenues improved 10.5% to $35.8 billion, exceeding the Zacks Consensus Estimate of $32.8 billion.

The improvement in revenues and earnings was mainly attributable to Ford’s strong performance in North America and Asia Pacific Africa. The company’s results were disappointing in South America due to unfavorable exchange rate as well as in Europe due to the sluggish economy.

Currently, shares of GM retain a Zacks Rank #3 (Hold). While we remain on the sidelines about General Motors, stock that is currently performing well in the broader auto industry includes Visteon Corp. (VC) with a Zacks Rank #1 (Strong Buy).

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