Is Gm A Good Stock To Buy
Reporting $2.25 per share in profits and $41.9 billion, GM fell short of analyst projections for quarterly sales (Wall Street had expected to see $42.2 billion). Regardless, the profit GM reported was a full 20% ahead of expectations, sparking a mini-rally in GM stock. It rose 3.6% on earnings day, and a total of 6.8% in the three trading days since earnings came out.
is gm a good stock to buy
The bump in stock price was not surprising, because GM delivered a whole lot more than just an "earnings beat" on Tuesday. Sales for the quarter surged an astounding 56% year over year. Vehicle sales by unit grew 17% year over year to 1.5 million, with the fastest growth being in South America (sales up 86%) and the greatest absolute growth in the all-important North American market -- 663,000 vehicles sold, for 27% year-over-year growth.
Look ahead, however, and the future seems pretty bright for GM stock. At the midpoint of predicted earnings -- $6.26 per share -- GM shares cost only 6.1 times current year earnings. For a blue chip stock that analysts believe will grow earnings at nearly 16% annually over the next five years, that's pretty darn cheap -- even before factoring in the company's modest 1% dividend yield.
GM stock also appears a pretty compelling bargain when valued on its finally reviving free cash flow. Assume the company hits close to the middle of its projected free cash flow range this year -- $8 billion -- and GM stock is trading for just under seven times FCF. Again, for a 16% grower with a 1% dividend, that price seems more than attractive.
Admittedly, with its share price down about 30% over the past 52 weeks, GM stock hasn't been a great investment in the recent past. But the way this business is performing, these low prices are not going to last. Simply put: This car stock is priced to move.
The stock repurchase is contingent a sale of debt, which is expected to take place on or before Sept. 30. The debt sale is likely to bring in more than $3.2 billion, and GM said the balance would be used for other general corporate purposes. GM will sell senior unsecured notes with five-, 10- or 30-year terms.
General Motors (GM) has agreed to buy back $5 billion in stock by the end of next year, heading off a potentially divisive proxy fight. The GM share repurchase will begin immediately and finish before the end of 2016.
Negotiations with Wilson's group had been going on for about two weeks and culminated during the weekend, CEO Mary Barra said Monday. She wouldn't say much about the talks or whether Wilson was resistant to a smaller stock buyback than initially demanded. The company also talked with other major shareholders, who agreed with the buyback, she said.
Before a jump in the stock price after raising the dividend in early February, GM "had not generated a dollar of net value for shareholders," Wilson said. GM shares were trading around $33, about the same price as its post-bankruptcy public offering in November of 2010, he said.
GM faces uncertainty in several areas that could drain its cash stockpile. The Justice Department is investigating the company for failing to disclose a deadly ignition switch problem in its small cars to government safety regulators. That penalty could be as much or more than the $1.2 billion that Toyota paid in a similar case. The switches are responsible for at least 57 deaths, and GM has committed to making payments to those injured and families of those who were killed. The company has set aside $400 million for the payments but says they could go as high as $600 million.
On December 9, 2013 the U.S. government got out of the auto business, selling its remaining shares of GM stock. One day later, GM became the first automaker to appoint a female CEO. Mary Barra was elected chairman of the board in 2016.
General Motors has filed paperwork with the SEC to clear the way for selling stock to the public. The automaker says U.S. taxpayers and other stakeholders will sell common shares. GM also will sell preferred shares.
General Motors has begun the process of removing the U.S. government from its car business. Yesterday, GM filed papers with the Securities and Exchange Commission for an initial public stock offering, or IPO.
TRACY SAMILTON: The filing doesn't disclose how much stock will be sold, but many analysts believe the U.S. Treasury wants to sell enough to become just a minority owner of GM, and raise 10 to $15 billion. That's a big IPO, and it won't be easy in this economy, says Josef Schuster of IPOX Schuster. He says GM will woo big global investors first to encourage smaller investors to join in.
SAMILTON: Schuster's company plans to buy some of the stock, despite the risks. How much investors buy will depend on the price. Schuster says setting that price won't be easy. If it's cheap, the stock will be snapped up in a hurry. That's good, but...
SAMILTON: The stock sale could happen by November. There will be plenty of number-crunching between now and then to see if taxpayers will get their $43 billion of equity back. But remember the initial in initial public offering. There will be more GM stock sold later, and it could take years for the government to sell off completely.
GM chairman Edward Whitacre predicted the upcoming GM initial stock offering will be priced between $20 and $25 per share. "It will be something like that," Whitacre said at an event in San Antonio, the San Antonio Express-News reported. "It's what everyone is guessing. It's too early to say."
More than 600,000 U.S. and Canadian employees and retirees are eligible to participate in the direct stock purchase plan, the company said earlier this week. The minimum investment for employees and retirees is $1,000 said a GM official.
No details have been made available about the date of the stock offering, the number of shares to be offered or their prices, but the IPO could be among the largest of its kind in US history. The Treasury Department has said it will take place in the fourth quarter, and industry experts expect it will come after the November 2 mid-term elections.
"ESPP" stands for Employee Stock Purchase Plan, which is a type of plan that provides you with a convenient way to buy your company stock. If you enroll, you choose an amount to be deducted from your paycheck, and those deductions accumulate to purchase stock on a predetermined schedule.
If your company offers a look-back provision, this compares the stock price at the beginning of the offering period with the price on the purchase date and uses the lower amount to calculate the purchase price. Because a look-back feature allows you to buy shares at whichever price is lower, the price at the beginning OR the end of the period, it is an attractive feature.
In a continuation of its diversification plans, GMAC formed GMAC Mortgage and acquired Colonial Mortgage as well as the servicing arm of Norwest Mortgage in 1985. This acquisition included an $11 billion mortgage portfolio. The same year, GM acquired the Hughes Aircraft Company for $5 billion in cash and stock, and merged it into Delco Electronics. The following year, GM acquired 59.7% of Lotus Cars, a British producer of high-performance sports cars.