GM earnings estimates slashed by 12 analysts Action is response to higher expenses for new models, rebates

December 20, 1996|By BLOOMBERG BUSINESS NEWS

DETROIT -- Twelve automotive analysts slashed fourth-quarter earnings estimates for General Motors Corp. yesterday in response to the company's year-end surprise that it spent more than expected to introduce new models and clear inventories.

The analysts lowered their estimates to an average of 50 cents a share, down from 99 cents a share, according to First Call Corp.

GM earned $1.87 billion, or $1.98 a share, in the year-ago quarter.

GM, which predicted earnings of 60 cents a share yesterday, told analysts it is spending more heavily than expected to introduce 15 cars and trucks in North America.

At the same time, slow sales are forcing GM to offer rebates averaging about $700 a vehicle, $100 more than analysts expected.

"If you want to lag the market with incentives, you are going to lose market share," said Nicholas Lobaccaro, a Bear, Sterns & Co. analyst who cut his fourth-quarter estimate by 30 cents a share to 50 cents.

zTC He said he doubts that GM will announce plans to buy back a large amount of its stock in the first quarter, as was widely expected.

"When you have a company that has sales volume down 15 percent a month, that is not a time to start rewarding shareholders with buybacks," Lobaccaro said.

Investors already were braced for a dismal quarter. Three labor strikes in the United States and Canada cost GM $700 million in lost production in the fourth quarter.

"It's a throwaway quarter," said Phil Fricke, an analyst with Prudential Securities. "The fourth quarter is traditionally a cleanup quarter."

GM's shares, which were down as much as $1 in the morning, were buoyed by a broader market rally to close down 12.5 cents at $54.375.

On Wednesday, after the profit warning, GM's shares fell $1.375.

John Casesa, an analyst at Schroder Wertheim & Co., changed his investment recommendation to "hold" from "buy."

Five analysts yesterday also lowered their estimates for next year, dropping the average estimate for 1997 of the nine who revised earnings yesterday to $7.41 a share, down from $8.24.

Pub Date: 12/20/96

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.