General Motors forecasts modest profit growth in 2014 image

GM, which plans 15 new or refreshed vehicles in the U.S. this year and 17 in China, forecast profit to “modestly” improve in 2014 as the automaker spends money to restructure nagging trouble spots overseas.

Analysts labeled GM’s forecast conservative and disappointing, though they noted it also provides the automaker’s new leadership with flexibility.

“While the guidance was slightly disappointing, we think this set-up could create a good entry point and better frames GM heading into the rest of the year,” RBC analyst Joseph Spak said in a research note. “The guidance also gives the new management team a little more wiggle room to deal with in their first year.”

Improved operating performance should offset $1.1 billion in additional restructuring costs, leaving margins for adjusted earnings before interest and taxes similar to 2013 while industrywide sales grow in the US and globally.

The restructuring costs are higher than the $900 million Barclays had estimated and GM’s forecast for Europe wasn’t as robust as expected.

Morgan Stanley analyst Adam Jonas called the forecast “appropriately conservative” and said he expects North American profit margins in the mid- to high-8 % range this year, rather than 9 or 10 %.

“We believe the company should have positive earnings revision risk once the dust settles,” he said. “The challenge of owning GM is that the company is still in the early innings of executing its structural turnaround while the U.S. auto cycle is approaching the later innings.”

Shares of GM slipped 1.6 % to $39.38 at the close in New York. The stock gained 42 % last year. Other automakers rose today, including Ford, up 1.8 % to $16.70, and Tesla Motors, up 1.8 % to $164.13.

Via Bloomberg, Reuters