General Motors is scheduled to release its next earnings report on Feb. 3, and the automaker has received a key upgrade going into that report. Consensus estimates suggest GM will report earnings of $1.18 per share and $38 billion in revenue for the fourth quarter. In addition to potentially better than expected earnings, one firm’s analysts see the possible downside as being “less severe.”

General Motors Company Upgraded For Earnings Power

Credit Suisse upgrades General Motors to Outperform

In a report dated Jan. 11, Credit Suisse analyst Dan Galves and his team bumped up their price target for GM from $37 to $38 per share and upgraded the stock from Neutral to Outperform. They think the cyclical worries about the auto sector are overdone, so as a result, they see a good risk/ reward profile for GM, particularly as its free cash flow is strong at about 13% of 2016 free cash flow yield.

Further, they see a number of specific factors for GM that will probably result in better than expected earnings power, both at trough and at current volume levels. As a result, they upped their 2015 earnings estimate from $4.80 to $4.85 per share and their 2016 estimate from $5.40 to $5.45 per share.

They also increased their estimates for Ford in order to bring them up to date with the accounting change made in connection with the automaker’s pensions. For Ford, their 2015 estimate moves from $1.60 to $1.88 per share, while their 2016 estimate rises from $1.85 to $1.88 per share.

Strong cost savings opportunities for GM

The Credit Suisse team said they see large opportunities for GM to save money on some of their costs and that they believe the automaker is “well-positioned for industry mega-trends.” General Motors trades currently at about 5.4 time 2016 earnings per share and 11 times their “trough earnings estimate.” But going beyond valuation, Galves and team said they think GM will keep performing Wall Street estimates because of significant cost savings in both components and commodities. They added that GM will benefit from a “much better product cadence” this year and next.

They note that General Motors beat expectations in 2015 by expanding its margin 120 basis points even though it saw only flat volume growth and a “trough product cadence.” They also think the automaker’s management team is starting to execute by pushing efficiencies throughout the business and “positioning the company to win in a global auto market that is likely to change massively over the next 5-10 years.”

As of this writing, shares of General Motors are up 1.22% at $29.89 per share.