General Motors Co. said Wednesday it is raising its profit estimates for 2016, is nearly doubling its stock repurchase program and is increasing its quarterly dividend by 6 percent beginning in the first quarter.
GM said its 2016 earnings per share expectations now are between $5.25 and $5.75, up from $5 to $5.50 a share, which the company announced on Oct. 1. The carmaker said the growth is expected through strong product launches, growth in areas such as GM Financial and aftermarket sales, efficiencies and “modest” global auto industry growth. The company also predicts better adjusted earnings before interest and taxes, adjusted margin and adjusted automotive free cash flow in 2016 as it predicts continued strong results in North America and China.
With its increased confidence in earnings, the GM board approved boosting the company’s common stock buyback program to $9 billion through 2017, up from $5 billion through the end of this year. The quarterly dividend also rises by 2 cents to 38 cents a share.
“We expect to sustain strong margins in North America and China and break even in Europe” this year, GM Chairman and CEO Mary Barra said.
The moves come as the automaker’s stock price has fallen nearly 11 percent since the end of 2015. Auto stocks have fallen early this year following a stock market slide in China and over concerns about interest rates rising in the U.S. and the impact that may have on auto sales. That’s despite the U.S. industry setting a new vehicle sales in 2015 and many analysts predicting sales will be even stronger in 2016.
Itay Michaeli of Citi Research, in an investment note Wednesday, called the news a “clear positive” for GM.
The Detroit automaker’s announcements come in conjunction with the 2016 Deutsche Bank Global Auto Industry Conference in Detroit. The conference coincides with the Detroit auto show.
Barra also announced a new GM Factory Pre-Owned Collection of more than 30,000 vehicles that starting next month will be available for shoppers online. It builds off GM’s Shop-Click-Drive online new car purchase program, which sold more than 38,000 vehicles last year.
SOURCE: Melissa Burden
The Detroit News