General Motors Co. (GM) saw a 34% decline in vehicle deliveries in the second quarter year-on-year due to the outbreak of the coronavirus pandemic which led to production disruptions and left consumers locked down at home.
The car maker said it delivered 492,489 vehicles in the U.S. in the second quarter. Shares rose 1.1% to $25.24 as GM reported that demand outpaced supply in the latter half of the quarter, adding that full-size pickup truck sales performed “exceptionally” well, and overall sales showed signs of recovery, especially deliveries to retail customers.
“Our resilient sales reflect an improving demand curve. GM entered the quarter with very lean inventories and our dealers did a great job meeting customer demand, especially for pickups.” said GM’s U.S. VP of Sales Operations Kurt McNeil. “Now, we are refilling the pipeline by quickly returning production to pre-pandemic levels. Having an appropriate mix of the right vehicles combined with the benefits of enhanced shopping technologies such as Shop. Click. Drive., positions us for success in the second half of 2020.”
Retail sales dropped 24% in the quarter with April being the worst month in the reported period as sales plunged 35%. GM said that since April, sales recovered significantly in May and June with year-over-year declines of about 20% or less as stay-at-home mandates were lifted gradually in some U.S. states. Availability of car models at dealerships is expected to start growing now that most manufacturing assembly plants have returned to normal operating levels, the car maker added.
Moreover, the majority of GM’s U.S. plants, including all truck and SUV plants, will continue to operate during the traditional two-week summer shutdown.
Shares in GM have surged 50% since hitting a low in March. The stock is still down 31% year-to-date with the $29.50 average price target suggesting that analysts expect the stock to advance 17% in the coming year. (See GM stock analysis on TipRanks).
However, CFRA Research analyst Garrett Nelson maintained a bearish Sell rating on the stock with a $15 price target (41% downside potential), saying that the share price rally since March is mirroring an overly optimistic, post-pandemic global auto demand environment. Another worrying child for Nelson remains the risk scenario related to GM Financial, the automaker’s financial arm.
Overall though, Wall Street analysts have a cautiously optimistic outlook on GM’s stock. The Moderate Buy consensus is based on 8 Buys versus 3 Holds and 1 Sell.
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