GM hints at dividend, stock buyback on 3Q profit
Wednesday, October 30, 2013
DETROIT (AP) — Another solid quarterly performance at General Motors brought the strongest talk yet of the automaker paying a dividend for the first time in five years, or perhaps buying back stock.
GM on Wednesday reported pretax profit of $2.64 billion for the third quarter, up almost 15 percent over a year ago. Earnings grew in North America, South America and China and losses narrowed in Europe.
Chairman and CEO Dan Akerson said on a conference call that the board knows that shareholders want the best possible return on their investment. “We understand what we’re here for, and one of them is to return money to our shareholders,” he said, without giving a specific time frame.
GM eliminated its common stock dividend in July 2008, as the company’s finances deteriorated. It filed for bankruptcy protection in 2009.
Crosstown rival Ford Motor Co. also stopped paying a dividend five years ago. But Ford resumed the payout in 2012, and doubled it to 10 cents in this year’s first quarter. That makes Ford stock more attractive than GM to many investors.
GM’s strong third-quarter performance was masked a bit by $900 million worth of one-time items that brought net income down 53 percent from a year ago. Net income totaled $698 million, or 45 cents per share. That compares with $1.48 billion, or 89 cents per share, a year ago. Without one-time items and after paying taxes, GM earned $1.7 billion, or 96 cents per share. Analysts polled by FactSet expected 94 cents per share.
GM has now been profitable for 15 straight quarters.
Revenue rose 4 percent to $39 billion, just short of Wall Street’s estimate of $39.2 billion.
Investors viewed the results favorably. GM shares rose $1.20, or 3.3 percent, to $37.26 in afternoon trading.
GM’s performance in North America was especially strong, with pretax earnings up 28 percent to $2.2 billion on solid pickup truck sales and better pricing. GM rolled out updated versions of its Chevrolet Silverado and GMC Sierra pickups in the spring.
GM’s average sales price rose 1 percent in the U.S. during the quarter to $34,566, according to Kelley Blue Book. Sales of the Silverado, its top-selling vehicle, rose 14 percent from a year ago. Prices for the pickup rose 2 percent to an average of $36,487.
In North America, GM’s profit margin — or the percentage of revenue it keeps after expenses — was the highest in two years at 9.3 percent. GM has a goal of 10 percent pretax margins in the region by mid-decade.
GM’s third-quarter loss in Europe fell by more than half to $214 million. Revenue there rose year-over-year for the first time in two years. Chief Financial Officer Dan Ammann said the company cut $400 million in costs, and updated versions of its Opel Mokka small crossover SUV and Adam subcompact sold well.
GM also plans to close a factory in Bochum, Germany, by the end of next year, causing significant restructuring costs that could show up as early as next quarter.
Outside of China, GM’s International Operations struggled. Pretax earnings fell 61 percent to $299 million due to weakness in India, Australia and Southeast Asia. The unit would have lost more than $100 million without $400 million in earnings from China. “We expect these challenges to affect our performance in the fourth quarter,” Ammann said.
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