With a big boost from its North American auto operations, General Motors Corp. reported record fourth-quarter earnings yesterday that were considerably higher than analysts expected.
For the three months that ended Dec. 31, GM reported net income of $1.8 billion, equal to $2.64 a share. That compares with restated net income of $1.6 billion, or $2.29 a share, for the same period in 1997.
Earnings from continuing operations, which analysts say offer a more accurate picture of the company's overall performance, rose 55 percent in the final three months of 1998.
The world's largest automaker posted an operating profit of $2.19 billion, or $3.25 a share. This was up from $1.42 billion, or $1.93, in the fourth quarter of 1997.
Analysts had expected GM to earn $2.65 a share, based on the average estimate of analysts surveyed by First Call Corp.
Fourth-quarter revenue rose 6.7 percent to $46.37 billion, compared with restated revenue of$43.45 billion in same period in 1997.
"GM's fourth-quarter earnings were huge," said Gary Lapidus, an analyst for Sanford C. Bernstein & Co., who gave the stock an "outperform" rating. "They beat my forecast by $300 million in North America," he said.
Although GM suffered through two costly strikes last year, its overall performance was good enough to result in the payment of profit-sharing checks of about $200 for each of its 231,000 union-represented workers in the United States, including those at its Chevrolet Astro and GMC Safari van plant in Southeast Baltimore. In 1997, the profit-sharing payment amounted to $730 per worker.
The company's North American operations, which account for more than 50 percent of GM's total business, earned $1.7 billion during the fourth quarter. This compares with a profit of $650 million in the final quarter of 1997.
"In North America, GM is cutting costs and it's selling more high-profit trucks," such as the redesigned Sierra and Silverado pickups, Lapidus said.
GM sold 1.15 million vehicles in the final three months of 1998, earning a 29.1 percent share of the U.S. market, down from 30.6 percent in the same period of 1997.
John F. Smith Jr., GM's chairman and chief executive, said: "We came back strong following the work stoppage in midyear and we intend to keep this momentum going in the future."
The strikes took a toll on the company. Net income for the full year was $3 billion, or $4.26 a share. This was down from $6.3 billion, or $8.45 a share, in 1997. Revenue fell to $161.3 billion from $166.8 billion in 1997.
Earnings of its Delphi parts business were off 20 percent in the fourth quarter to $280 million, while GM's finance arm, General Motors Acceptance Corp., posted a 6.8 percent increase to $298 million. Hughes Electronics Corp. earnings were up 70 percent to $119 million.
GM's stock, which was up $2.30 in midafternoon trading, closed at $89.125, up $1.125.
Bloomberg News contributed to this article.
Pub Date: 1/21/99