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NEW YORK (AP) — A Sterne Agee analyst became the latest stock-watcher to raise his estimates on General Motors Co. Friday, saying moves to cut the government's stake in the automaker will benefit shareholders.
The U.S. government bailed out GM during the financial crisis in 2008 and 2009. In a deal announced earlier this month, the Detroit company will spend $5.5 billion to buy back 200 million shares from Treasury this year. The government will sell its remaining stake in the auto company, about 300 million shares, by early 2014.
Analyst Michael Ward, who rates GM shares a "Buy," said he now believes that GM will earn $4.30 per share in 2013, up from his previous prediction of $3.85 per share. He predicts $5 per share in 2014 rather than $4.50 per share. FactSet says analysts expect profit of $3.91 per share and $5.01 per share, on average.
GM's plan to buy back shares will leave less stock on the market, potentially increasing the company's profit on a per-share basis.
Since GM and Treasury announced the plan on Dec. 10, GM shares have risen nearly 10 percent. Wall Street estimates have also increased significantly. Before the moves were disclosed, analysts expected the company to earn $3.68 per share in 2013 and $4.67 a share in 2014.
Ward raised his price target by $4 to $34. GM shares dipped 17 cents to $27.79 Friday morning. The stock peaked at $27.99, its highest price since August 2011, on Thursday. Shares last traded at $34 in February 2011.