General Motors Co. (GM) earned a profit of $3.2 billion or $1.77 per share in the first quarter of 2011 that increased more than threefold from $865 million or 55 cents per share a year ago. However, more than half of the profits have been contributed by one-time gain from sales of the company’s ownership interest in Delphi Automotive LLP ($1.6 billion) and Ally Financial Inc. ($300 million).

Excluding these gains and a $0.4 billion goodwill impairment charge at GM Europe (GME) resulting from a change in accounting standards and charges of $0.1 billion at GM International Operations (GMIO) related to revised tax regulations affecting the company’s India joint venture, GM’s profit stood at $1.7 billion or 95 cents per share, topping the Zacks Consensus Estimate by a penny. It was also GM’s biggest profit in 11 years since its $1.8 billion earnings in the second quarter of 2000.

Revenues during the quarter went up 15% to $36.2 billion on sales of 2.2 million vehicles globally, up 11% from the prior year. It exceeded the Zacks Consensus Estimate of $35.2 billion.

Strong demand for its fuel-efficient lineups including Chevrolet Cruze compact and Equinox crossover helped boost the company’s sales. The automaker occupied a market share of 11.5% during the quarter, up from 11.1% in the year-ago quarter.

GM’s earnings before interest and taxes (EBIT) were $3.53 billion compared with $1.82 billion in the first quarter of 2010. On an adjusted basis, EBIT was $2.04 billion in the quarter versus $1.70 billion in the year-ago quarter.

Segment Results

GM North America (GMNA) reported an EBIT of $2.9 billion compared with $1.2 billion in the first quarter of 2010.  On an adjusted basis, GMNA earnings increased by $0.1 billion to $1.3 billion from the same quarter of 2010.  The company expects GMNA’s quarterly EBIT-adjusted results to improve for the remainder of the year driven by better pricing and improved fixed cost that may offset commodity cost increases and unfavorable mix.

GME reported a negative EBIT of $390 million versus $477 million a year ago. On an adjusted basis, GME’s results improved by $0.6 billion from the year-ago level.  GME aims to achieve breakeven results on an adjusted basis before restructuring for the entire year.

GMIO reported EBIT of $480 million compared with $908 million in the first quarter of 2010. On an adjusted basis, GMIO earned $0.6 billion in the first quarter, a decline of $0.3 billion compared with the first quarter of 2010. 

GM South America (GMSA) reported an EBIT of $0.1 billion, down $0.2 billion from the first quarter of 2010. There were no adjustments in either of the periods.

Financial Position

GM had cash and cash equivalents of $21.0 billion as of March 31, 2011 compared with $21.1 billion at the end of 2010. Total debt increased to $5.0 billion as of the above date from $4.6 billion as of December 31, 2010. Consequently, debt-to-capitalization ratio increased to 11.6% from 11.3% in the year-ago period.

During the quarter, the company had a net cash outflow of $596 million compared with an inflow of $1.85 billion in the year-ago quarter. After deducting $1.3 billion of capital expenditures, the company’s free cash flow use stood at $1.9 billion from its automotive operations.

Our Take

GM, a Zacks #3 Rank (Hold) stock, had to seek bankruptcy protection in 2009 due to unfavorable economic conditions and a rapid decline in sales. However, the automaker recouped its sales and earnings by banking on the emerging markets, economic recovery and improved cost structure. The company completed its IPO at the end of last year, through which, it has repaid up to $23.1 billion to the U.S. government.

GM is still lagging behind its hometown rival, Ford Motor Co. (F), in spite of selling more vehicle units. Ford posted a 48% rise in profit to $2.61 billion in the first quarter of 2011 from $1.76 billion in the same quarter of 2010. On earnings per share basis, profits rose 35% to 62 cents from 46 cents a year ago, thereby topping the Zacks Consensus Estimate by 12 cents.

The company’s revenues escalated 18% to $33.1 billion, surpassing the Zacks Consensus Estimate of $30.5 billion. The increase in revenues was backed by a 12% rise in sales to 1.40 million vehicles.

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