General Motors' second-quarter net income of $1.1 billion beat analyst estimates by a wide margin as rising light-truck sales in the U.S. and surprising strength in China led the way.
The company said adjusted earnings per share were $1.29, beating the average estimate of $1.06 and more than doubling the year-earlier result on that basis. Chief Financial Officer Chuck Stevens credited record margins in North America and improved profit in China.
GM's profit rebounded from a year earlier as U.S. buyers continue their love affair with trucks and the nation's largest automaker overcame a tough car market in China by boosting sales of more-expensive sport utility vehicles and Cadillacs. Concerns about weakness in China have weighed on GM's shares, sending the stock down 13 percent this year through Wednesday.
"The first two quarters of the year were strong as we fully capitalized on a robust North American industry and maintained our strength in China, despite the challenging conditions in that market," Chief Executive Officer Mary Barra said in a statement.
The company expects profit in North America and China to continue to improve in the second half, which should boost adjusted earnings before interest and taxes above the first half's $5 billion, Stevens said.
"We had a strong quarter that will surprise people with strength where it counts," Stevens told reporters Thursday morning at company headquarters in Detroit. "We're confident we can sustain that in the second half."
"GM delivered powerful second-quarter results significantly in excess of low expectations, and generated very strong free cash flow while buying back a greater-than-expected $2.1 billion of stock at advantageous prices," Ryan Brinkman, a JPMorgan Chase & Co. analyst, said in a research note. He rates the stock the equivalent of buy.
The U.S. market continues to be healthy, and GM posted a record 10.5 percent profit margin in North America, based on adjusted earnings before interest and taxes. North American profit on that basis rose to $2.8 billion from $1.4 billion.
GM said equity income from its China joint ventures rose to $502 million from $476 million a year earlier. Even asauto sales have struggled in the market, GM is selling more SUVs and Cadillac luxury cars. The automaker also has cut costs.
In the first half, GM's market share in China rose slightly to 14.6 percent. Sales of SUVs in China increased 83 percent in the quarter, which helped profits, Barra told analysts on a conference call.
Barra said GM expects volatility in China but still thinks the company can grow this year. In the next 10 or 15 years, GM sees the total market in China growing to 35 million vehicles a year, from about 20 million now, Stevens said.
GM had about $1.1 billion in pretax adjustments, with $600 million from currency-related issues in Venezuela, $400 million related to restructuring in Thailand and $75 million added to the estimated costs of its ignition-switch recall-compensation program.
The company reported a $100 million loss in South America, similar to a year earlier, and broke even in Europe after losing $300 million there last year.
Revenue fell to $38.2 billion. Analysts had predicted sales of $40.4 billion, up from $39.6 billion a year earlier. GM said in January that the results for the year would be better than expected thanks to a resurgence of truck sales in the U.S.
GM also said it earned a return on invested capital of 23.4 percent in the past 12 months, beating its target of 20 percent that was established when the company settled with activist investor Harry Wilson earlier this year.
The automaker said it bought back $2.1 billion in shares this year through July 21. GM has said it plans to repurchase a total of $5 billion of stock by the end of 2016.