General Motors (NYSE: GM) Stock Fights Declining Expectations Ahead of Earnings

But Wall Street was also unimpressed with GM's 2014 forecast three weeks ago, when company executives said they planned to use rising profits from sales in the United States and China to pay for large-scale restructuring.

Still, GM's December quarter earnings should be strong. An EPS of $0.89 would be a 65% jump from the $0.54 a share the automaker earned in the same quarter in 2012. Revenue is expected to land at $40.96 billion, which would be a 4.2% increase from the year-ago quarter.

For the full year, analysts expect GM earnings of $3.38 per share (up from $3.24 in 2012) on revenue of $155.48 billion (up from $152.26 billion).

The improvement in GM's numbers over the past year has come from robust sales in the United States and China, and better than expected sales in Europe, which nevertheless has remained a drain on profits.

Sales in China, GM's biggest market, rose 11% in the fourth quarter. GM is spending $1.3 billion to build a Cadillac factory there to increase its share of the luxury market. Building the cars there means GM avoids the import tariff, enabling the company to both lower the price and increase margins.

Such efforts are part of GM's strategy not just to restore the company to its perch as the world's top automaker, but to make sure it avoids the mistakes that led to its bankruptcy during the financial crisis.

"We're taking advantage of strength to really take aggressive and assertive steps to fix other parts of the business," GM President Dan Ammann said during a January presentation to auto-industry analysts in Detroit. "We're committing a large amount of cash and resources to restructure Europe and we are spending money, real money to restructure some of the international operations that will pay off substantially for us in the future."

But that kind of investment will remain a drag on profits for the next several quarters, which means it will be hard for GM stock to duplicate the 47% gain it enjoyed in 2013, but it should set the company up for much better 2015.

A number of model refreshes have both helped boost sales and allowed GM to raise prices, which has boosted margins.

For instance, the new Impala sedan is priced about $7,000 higher than the previous model; the Silverado pickup truck is about $6,000 more.

More good news for GM's margins is that sales of its light trucks have grown faster than sales for its cars, which will also help the company get to its stated goal of 10% pretax margins in North America from 8% now.

One wild card that could help the GM stock price is if a recovery in the Eurozone economy starts to take hold this year. The European auto market ended its slide last year, and GM now sees losses from that region as lower than expected.

With 23 new models in the pipeline for the European market, GM thinks it can turn a profit there within the next year or two.

A more immediate catalyst for GM stock could be the resumption of its dividend in March, which was suspended in 2008. The company will start paying $0.30 cents a share on a quarterly basis, which will provide a yield of about 3%.

GM stock was $35.22, down $0.60 in late trading Wednesday.

Will #GeneralMotors ride better sales to an earnings beat, or will its spending on infrastructure end up disappointing Wall Street? Make your call on Twitter @moneymorning or Facebook.

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