GM – General Motors Looks Toward a Smoother Road

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Welcome to the Stock of the Day!

Automaker General Motors (GM) is dominating headlines as its top executive announced his resignation plans today . For quite some time I’ve advised you stay away from GM, but with it on the cusp of such a big shift, does this carmaker finally get the green light from me?

Find out today.

Company Profile

Once a global institution, General Motors is an American carmaker whose roots stem back to 1908. General Motors is behind household car names like Cadillac, Chevrolet and GMC in the United States as well as Opel and Vauxhall in Europe. Currently, the company employs just over 210,000 worldwide and operates in just under 160 countries.

Earnings Preview

Just last week, GM reported strong U.S. auto sales for the month of November. Compared with November 2012, sales jumped 13.7% to 212,060 vehicles. This represents the highest November sales in six years. The company reported sales gains with all four of its brands: Chevrolet, GMC, Cadillac and Buick. Last month’s sales are expected to boost the company’s top- and bottom-line numbers for the quarter. Right now, analysts are calling for 4.3% sales growth and 87.5% earnings growth. However, the consensus estimate has fallen by $0.04 over the past two months so this could be a red flag that GM will miss estimates. We’ll just have to see when the company next reports in mid-February.

Competition Breakdown

General Motors’ main competitors are Ford (F) and Toyota (TM), and GM is currently lagging behind the competition in terms of analyst earnings revisions, earnings momentum and return on equity. When you plug all three companies into Portfolio Grader, you can see that Ford is currently doing the best in terms of its balance sheet items (with A-rated cash flow and return on equity), while Toyota is the preferred choice of institutional investors (with a B-rated Quantitative Grade). Due to buying pressure, Ford is a C-rated hold, while Toyota is the only stock I recommend for new money right now.

Current Ratings

Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. 2013 has been a bumpy year for this Conservative ranked stock. Things really started to look up for General Motors at the beginning of the year, when the stock unexpectedly climbed to a hold, and then a buy on a surge in buying pressure—but the strength was short-lived.

By February, the stock had retreated back to a sell. And then after climbing to a B-rated buy during the summer months, it has fallen back to a C-rated hold. GM currently receives a C for its Quantitative Grade, but even a slight change could send GM back to a sell. That’s because the company is still struggling in terms of its fundamentals, especially earnings growth, cash flow and return on equity. GM receives a D for its Fundamental Grade.

Bottom Line: As of this posting, I consider GM a C-rated Hold.

Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!