NEW YORK (CNNfn) - General Motors Corp. reported a record second-quarter profit Tuesday, beating Wall Street forecasts despite some loss of market share in its home market.|
Company officials say that, despite some softness in North American sales, it is on target to meet forecasts of a record profit for the year -- and that it is eyeing additional share repurchases as a way of continuing to improve earnings per share.
The world's largest automaker reported second-quarter net income of $1.8 billion, or $2.93 a diluted share -- above consensus forecasts of $2.82 a share, according to First Call, which tracks analysts' estimates. A year earlier, earnings were $1.7 billion, or $2.66 a share.
Revenue rose to a record $48.7 billion in the quarter from $45.1 billion as the number of vehicles sold rose to 2.36 million worldwide from 2.33 million.
But GM actually had lower operating income from its core North American auto sales, as that unit's earnings slipped to $1.4 billion from $1.5 billion a year earlier. The company cited investments in new products and e-commerce initiatives for the decline.
Weakness in North American sales
GM also saw a further drop in its share of sales in that key market. It sold 684,000 cars in the United States, up from 664,000 a year earlier -- but that led to a drop in its share of the North American car market to 28.4 percent from 30.3 percent a year earlier.
U.S. truck sales fell to 669,000 in the quarter from 699,000 a year earlier, as its North American truck market share decline to 27.3 percent from 28.6 percent. That also sent the inventory of trucks up to 96 days from 75 days a year earlier.
The company said part of the problem was a strong market overall, which made market share difficult to maintain. It also said it saw greater incentives by competitors, which were not initially matched by GM in the period. It expects further discounting to thin inventories in this quarter.
CFO sees record profit, more share repuchases
Company officials insisted they were not concerned about the apparent softness in the sales numbers.
"We're optimistic about the balance of the year," Michael Losh, the company's chief financial officer, told analysts. "We're comfortable with where the consensus is, which means we're positioned to obtain record earnings per share in 2000."
First Call's forecast GM's earnings should reach $9.84 a share this year, up from $8.54 a share in 1999.
Outside of the North American market, GM saw its European profit slip to $166 million from $187 million a year earlier. But GM Latin America earned $10 million after a $38 million loss a year earlier, and Losh said those operations have turned a corner and should remain profitable.
Losses at its Hughes Electronics unit also narrowed on greater satellite television subscription revenue. Profits also edged up at GM Acceptance Corp., its finance arm, despite rising interest rates.
One way that GM has maintained earnings per share growth is through share repurchases, which have reduced shares outstanding by 29 percent in the last few years. While Losh wouldn't commit to details of further repurchases, he suggested that the company would look to continue its efforts there.
For the first six months, net income slipped to $3.53 billion, or $5.74 a diluted share, from $3.55 billion, or $5.44 a share, from continuing operations a year earlier, when there were more shares outstanding. Year-to-date revenue rose to $95.6 billion from $87.5 billion.
GM (GM: Research, Estimates) stock, one of 30 in the Dow Jones industrial average, rose 7/16 to 60-13/16 in late morning trading Tuesday.