Morningstar

GM's Reduced Outlook No Surprise

The automaker's reduced sales numbers for 2017 are driven more by the fleet side than the more-profitable retail channel.

Securities In This Article
General Motors Co
(GM)

We are not changing our fair value estimate after

GM’s tone on 2017 U.S. sales has been more positive than some other firms even as sales declined this year. Therefore, we are not surprised to see GM now say it expects 2017 sales in the low 17 million range from mid-17 million because we predicted a range of 17.0-17.2 million earlier this year. The weakness is more on the fleet side than the retail channel, which does not terribly worry us as retail is generally more profitable and better for residual values long term. Management reports strong pricing in light-truck models, but car segments are weak and not expected to improve soon, which makes sense given the U.S. industry’s light-truck mix in the first five months of this year has risen by 410 basis points to 62.7%. More cargo space, cheap gas, and crossovers that in some cases start at prices barely above mid-size sedans explain this mix shift.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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