No. 1 automaker tops expectations with strong profit hike; outlook more conservative than forecasts.
July 21, 2004: 8:33 AM EDT
NEW YORK (CNN/Money) - General Motors Corp. reported sharply improved second-quarter earnings Wednesday that beat Wall Street expectations for the period, but its earnings outlook was somewhat more bearish than current expectations.
The world's largest automaker earned $1.3 billion, or $2.36 a share, in the quarter, from continuing operations. That's up from $879 million, or $1.57 a share, it earned on that basis a year earlier. Analysts surveyed by earnings tracker First Call were forecasting EPS of $2.24 a share in the period.
The company said third-quarter EPS will be between 75 cents and $1.00. First Call's forecast is for EPS of 98 cents in the current period, up from 79 cents a year earlier.
GM repeated its full-year EPS guidance of $7.00, which is below the current First Call forecast of $7.12, though it's well above the $5.62 a share it earned in 2003.
Revenue at the company increased to $49.1 billion from $45.9 billion a year earlier. Worldwide vehicle sales edged up to 2.2 million from 2.1 million a year earlier.
The company's strong second quarter performance was helped by record results at its finance unit, GMAC. It earned $860 million in the second quarter of 2004, up from $834 million in the year-ago period. But while its auto operations' earnings trailed the finance profit contribution, improved auto results in most regions was responsible for the big hike in earnings.
Overall, GM's automotive earnings reached $529 million, up from $140 million a year earlier. Its key North American auto operations posted improved earnings of $328 million, down from $83 million, despite a loss of market share.
The company said lower material costs and improved pricing more than offset a less-favorable mix and higher recall costs. Chairman and CEO Rick Wagoner said despite the improved results in North America, overall sales, market share and financial results were well below expectations. He said the company must move faster to introduce new vehicles, improve quality and cut costs.
GM Asia Pacific earned $236 million in the second quarter of 2004, up from $163 million in the year-ago quarter, helped by strong sales in China and lower losses at its Korean operations, GM-Daewoo Auto & Technology Co.
GM Latin America/Africa/Mid-East division earned $10 million compared to a $103 million loss a year earlier. But its European operations saw losses increase to $45 million compared with $3 million a year earlier. It blamed intense price competition, foreign-exchange losses and continuing restructuring costs for the increased losses.
"Despite growing market share, we're not getting the revenue growth that we had hoped for, particularly in the traditionally large western European markets," said a statement from Wagoner.
Shares of GM (GM: Research, Estimates), a Dow component, lost 17 cents to $43.60 in trading Tuesday.
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