EFTA02350788.pdf

From: Richard Kahn Sent: Tuesday, February 7, 2017 2:43 PM To: jeffrey E. Subject: Fwd: General Motors Company: 4Q16 Sets a Strong Base for Structural Change: Reiterate GM as Top Pick Richard =ahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 tel fax cel Begin forwarded message: From: =/b>"Morgan Stanley" Subject: =/b>General Motors =ompany: 4O16 Sets a Strong Base for Structural Change: Reiterate GM as =op Pick Date: =/b>February 7, 2017 at 9:08:01 AM =ST To: Reply-To: = <http://www.morganstanley.com/img/cs/spacer.gif> =td class=""> = =/a> =td class=""> =td valign="middle" style="padding: 0cm 0cm 0cm 0cm" class=""> <http://www.morganstanley.com/> =Wealth = Management =/p> =/td> Subscription =otification =ebruary 7, 2017 =o:p class=""> =/span> EFTA_R1_01328535 EFTA02350788 <http://www.morganstanley.com/img/cs/spacer.gif> = = =td class=""> =div style="font-size: 10.0pt; color: #666666; font-weight: normal" =lass=""> = = Download =eport = =/div> =/td> = = <http://www.morganstanley.com/img/cs/spacer.gif> General =otors Company: 4Q16 Sets a Strong Base for Structural Change: Reiterate =M as Top Pick Adam Jonas, CFA — Morgan =tanley February 7, 2017 2:06 PM =MT GM =osted an 18% beat vs. our Adj. EBIT ests, driven by NA and Europe. =ther regions in line. GM reiterated its strong 2017 outlook including =6bn auto FCF (we fcst $7bn auto FCF). We see GM in position to surprise =he market on FCF, the pace/scope of structural change and cash =eturn. 4 key thoughts on the 4Q result: 1. The 2016 EBIT and EPS give us =mproved confidence in GM's ability to deliver the top end of =he range of its 2017 guidance. We already had expected GM to post $6.32 =f EPS in 2017. This was before the 18%4Q Adj. EBIT beat and nearly 20 =ents of EPS beat in 4Q. GM forecasts $6.00 to $6.50 of EPS in 2017. =onsensus sits at $6.05. We think consensus needs to come up.2. NA EBIT =eat us significantly. Coming in at $2.6bn vs. Our $2.3bn forecast. =ositive contributions from Volume and Price more than offset higher =eadwinds from Mix (temporary) and Cost. NA 4Q margin of 8.4% was more =han 100bps above our expectation for the quarter. 3. China missed our =xpectations modestly in the quarter. GM China equity income was =elatively flat YoY at $0.5bn vs. our forecast of $0.6bn in the quarter. =his despite wholesale deliveries from the China JVs coming in at 1,261 =illion units vs. our estimate of 1,201 million units. 4. No =ignificant mandatory pension contributions planned for next 5 years. =4% upside to our $42 target. GM has 63% upside to our $60 bull case. =ur bull case is supported by potential strategic moves to seed and =eparate its auto tech ventures and a repositioning of Cadillac as a =captive Tesla' and US SAAR potentially supported by accelerated =eplacement demand to purchase 'life saving' cars, potentially driven by =olicy intervention. The bull case is also driven by an assumption of =ricing and mix declining more slowly than expected, in part due to a =ontinuation of interest in the company's most profitable =egments (pickups and full-size SUVs) where we believe GM generates =argin on par with or even in excess of Ferrari. This =lert is sent from: =ndrew Atlas, =a href=" =1p> 2 EFTA_R1_01328536 EFTA02350789 =ou received this because you asked to be alerted to: GENERAL MOTORS COMPANY =br class=""> Please contact your FA if you want to unsubscribe from =he alerts. =/p> =span style="font-size: 10.0pt; color: #666666" class=""> = =br class="webkit-block-placeholder"> =span style="font-size: 10.0pt; color: #666666" class=""> = =br class="webkit-block-placeholder"> =!-- end content --> 3 EFTA_R1_01328537 EFTA02350790