General Motors shares plummet the most in 32 weeks on Tuesday, fourth-quarter net income shrinks partially due to exchange rate effects

Shares of General Motors Company (GM) fell the most in a bit over 32 weeks on February 7th, after the third largest automaker worldwide reported a 71.4% year-on-year drop in its fourth-quarter net income in part due to recent appreciation of the US Dollar against the UK Pound Sterling. The stocks reaction also reflected investor concerns in regard to expanding inventories of unsold vehicles in the United States.

General Motors shares registered their largest daily slump since June 24th 2016 during Tuesdays session, while ending a two-day string of gains. The stock went down 4.70% ($1.73) to $35.10, after touching a daily low at $34.80, or a level not seen since December 30th 2016 ($34.67). In the week ended on February 5th the shares of the largest vehicle manufacturer in the United States lost 1.84% of their market value compared to a week ago, which has been the worst performance since the week ended on January 1st. The stock has erased earlier gains and is now down 4.12% so far during the current month, following a 5.08% increase in January. The latter has been a third consecutive month of gains. For the entire 2016, General Motors shares added 2.44%.

General Motors net income was reported to have shrunk to $1.8 billion ($1.19 per share) during the quarter ended on December 30th from $6.3 billion ($3.92 per share) during the same quarter of 2015.

The companys earnings per share, excluding special items, were reported at $1.28, a figure that outstripped the median forecast by analysts ($1.17).

Approximately $500 million of the entire drop in GMs fourth quarter net income was attributed to foreign currency exchange rate effects. Of that figure, about $300 million were lost as a result of UK Pound depreciation following the June 23rd 2016 vote in favor of a “Brexit”.

The automaker now projects its adjusted earnings per share to be within the range between $6.00 and $6.50 during the current year, in comparison with earnings of $6.12 per share in 2016.

In North America, General Motors key market, inventories of unsold vehicles at US dealers were reported to have grown by over 30% to 845 000 vehicles at the end of Q4 2016.

At the same time, the companys adjusted profit margins in the region shrank to 8.4% in the last three months of 2016 from 10% during the same period a year ago. Full-year adjusted profit margins in North America decreased to 10.1% in 2016 from 10.3% in 2015, according to GMs report.

As reported by Reuters, in a conference call, General Motors Chief Executive Officer Mary Barra and Chief Financial Officer Chuck Stevens were asked about the potential effects on the company, in case the Trump administration successfully imposes new taxes on imported goods.

“We support tax reform that would make the U.S. manufacturing base stronger. A border tax is one part”, CFO Stevens said, cited by the same media. “There are a lot of moving pieces.”

“I’ve shared a lot of information about the dynamics in the auto industry”, CEO Barra was quoted as saying. “Right now it’s a very constructive dialogue. The administration is really listening.”

Daily and Weekly Pivot Levels

With the help of the Camarilla calculation method, todays levels of importance for the General Motors stock are presented as follows:

R1 – $35.21
R2 – $35.31
R3 (Range Resistance – Sell) – $35.42
R4 (Long Breakout) – $35.74
R5 (Breakout Target 1) – $36.11
R6 (Breakout Target 2) – $36.27

S1 – $34.99
S2 – $34.89
S3 (Range Support – Buy) – $34.78
S4 (Short Breakout) – $34.46
S5 (Breakout Target 1) – $34.09
S6 (Breakout Target 2) – $33.93

By using the traditional method of calculation, the weekly levels of importance for General Motors Company (GM) are presented as follows:

Central Pivot Point – $36.30
R1 – $37.14
R2 – $37.94
R3 – $38.78
R4 – $39.61

S1 – $35.50
S2 – $34.66
S3 – $33.86
S4 – $33.05