DETROIT -- General Motors said it expects earnings per share to rise this year, topping what is expected to be a record profit for 2016, as the company launches high-margin crossovers in North America and grows sales in China.
The company also said Tuesday it would expand a stock-buyback program and cut costs more aggressively than previously announced.
The outlook would mean a third consecutive increase in GM’s profits in 2017, even as analysts project a slight decline in U.S. auto sales and Ford Motor Co. warns of lower earnings in the year ahead.
GM said the results will allow it to buy back $5 billion more of its stock, expanding a repurchase program started in 2015 to $14 billion.
Shares in GM rose 3.7 percent to close the day at $37.35.
Separately, Standard & Poor’s lifted GM’s credit rating one level Tuesday to BBB, the second step above junk. GM should be able to maintain strong cash flow and steady profitability this year and next even as global auto demand slows, Nishit Madlani, an S&P credit analyst, wrote in a statement.
CEO Mary Barra, speaking to analysts at a conference hosted by Deutsche Bank, said GM has increased its target for annual cost reductions by $1 billion, to $6.5 billion through 2018. The company already has achieved cuts totaling $4 billion since 2014.
“We’ve generated consistently strong results, and we’ve done that for the last several years while delivering great vehicles and establishing a leadership position in defining the future of personal mobility,” Barra said. “Going forward, we will stay focused on executing our strategic plan and generating profitable growth that is needed to create long-term value for our shareholders.”
GM said it now expects to post adjusted earnings of nearly $6 per share for 2016 and between $6 and $6.50 per share this year. Both figures would top GM’s current record profit since its 2009 bankruptcy of $5.02 a share in 2015. That translated to total net income of $9.7 billion.
North America strong
Barra said GM in 2016 generated record post-bankruptcy revenue, earnings before interest and taxes, and margins. She said GM expects its margins in North America, which account for the bulk of its profits, to top 10 percent for a second straight year.
GM projects automotive-adjusted free cash flow of about $6 billion in both 2016 and 2017, up from $4.88 billion in 2015.
New and refreshed vehicles are a major part of the forecast. GM said it expects 38 percent of its global volume in 2017 through 2020 to be vehicles in production for less than 18 months, up from 26 percent from 2011 through 2016. The company said more than half of its crossover, SUV and pickup sales through 2020 will be newly updated, compared with 38 percent in the previous six years.
GM President Dan Ammann said continued strength in the U.S. -- industry sales are widely expected to top 17 million for a third consecutive year -- is a big reason GM is so optimistic about 2017.
“We see from a macroeconomic point of view pretty robust underpinnings for another good year, absent some external shock to the system,” Ammann told reporters ahead of GM’s analyst presentation. “Clearly the mix in the market is favorable and with that obviously incremental profitability opportunities there. So we see really more of the same and continuing to enjoy a pretty favorable environment.”
Analyst Efraim Levy of CFRA Research on Monday raised his estimate for GM’s 2016 earnings to $6.05 per share but cut his projection for 2017 to $5.68. “We see Q4 results benefiting from a strong mix,” Levy wrote in a note to clients, “but see rising profit pressure in '17.”
Bloomberg contributed to this report.
