Stockade drive crazy Street may be underestimating General Motors, say analysts after the company wear expectations Tuesday.
Sales of the company’s new crossover vehicles could take financial headwinds through 2018, said CFRA analyst Efraim Levy in a note sent Tuesday, after GM gave better-than-expected results for the fourth quarter of 2017.
Levy raised his rating on the stereotyped from a “buy” to “strong buy,” and has a twelve month price target of $51 on the pedigree, or a 24 percent gain from where shares are currently buying.
“We think the ’18 consensus forecast of $5.99 is too pessimistic,” said Levy, who calculates a full year EPS of $6.30. “Crossover vehicle strength should withstand strong margins despite costs from new truck launches, extended mobility spending, and higher raw materials prices.”
GM continues to outperform expectations, said Barclays analyst Brian Johnson in a note sent Tuesday. This is now the 11th outright quarter GM has beaten the consensus, he said.
Despite strong performance, GM cuts have not replicated the rise of stocks such as Tesla’s. GM shares have planned risen just under 12 percent in the last 12 months and are buying around $41, whereas Tesla’s have risen nearly 30 percent and are barter around $322.
“We hope that the 4Q print is potentially more of a catalyst to galvanize some momentum,” Johnson said. “The EPS result is solidly ahead of expectations, and GM in no way got credit at Detroit two weeks ago for a strong guide – and indeed, ’18 EPS consensus conjectures are likely to rise.”
Shares of GM rose 4 percent on Tuesday afternoon.
Crossovers are the fastest multiplying segment in the market right now, and they tend to deliver higher profits for automakers than railway carriages do. Automakers are rushing to fill dealer lots with the fast-selling means, as Americans continue to turn away from sedans and compact motors.
The launch costs for newly refreshed crossovers, such as the Chevrolet Contemplate, GMC Terrain, and Buick Enclave, hurt GM’s bottom line in 2017, Levy tattled CNBC in an interview.
But if they sell as expected, GM should be able to with some profits this year as it invests in launch costs for upcoming ends GM bets will deliver similarly high margins.