General Motors (GM) Still On Buy
GM has officially agreed to sell its European business to Peugeot. The deal was announced this morning and GM is trading slightly higher pre-market.
I expect the sale to be positive for GM’s earnings; its European operations haven’t been profitable in 18 years. Peugeot will pay $2.33 billion for GM’s 12 European factories as well as the company’s Vauxhall and Opel brands, which are based in Britain and Germany. Brexit’s impact on Vauxhall sales was a major drag on GM’s 2016 results, so it will be nice to have the laggard off the books.
In addition to the longer-term benefit to earnings, the deal could provide a shorter-term boost to GM’s stock. High yield investors who don’t own GM yet should try to buy on pullbacks.