SAN FRANCISCO (MarketWatch) — General Motors Co. made it five straight quarters in the black on Thursday, reporting that first-quarter earnings tripled on rising demand for smaller, fuel-efficient cars.

But investors weren’t buying it. GM GM, +2.95% shares dropped 3% to close almost a dollar below its $33 IPO price from last November.

Wall Street Strategies analyst David Silver explained that, despite the decent numbers, there are still plenty of question marks.

“It was an ok report, though cash flow wasn’t as good as expected and incentives are needed to really push sales,” he said. Silver also blamed the recall of the Cruze, which is “supposed to be the savior of GM.”

GM beats estimates, will up prices

GM is recalling about 154,000 Chevy Cruze sedans, the brand’s top-selling car, in the U.S. and Canada due to problems with the steering shaft and automatic transmission.

Furthermore, the government’s looming sale of GM shares may be having an unsettling impact on shareholders.

“Can you say over dilution?,” Silver said. “It is pretty much a foregone conclusion that we are going to lose money on GM, so the government is looking to end the pain sooner rather than later.”

The U.S. government now owns 26.5% of GM, having cut its stake down from 61% in the wake of its $50 billion bailout in 2009.

As for the results, GM posted a profit of $3.2 billion, or $1.77 a share, up from $865 million, or 55 cents a share, a year ago. The latest quarter included special items that increased earnings by 82 cents a share, mostly due to the sale of its stake in Delphi Automotive.

Revenue rose to $36.2 billion, from $31.5 billion.

Wall Street analysts were looking for GM to earn 88 cents a share on revenue of $35.3 billion, according to a survey by FactSet Research.

GM North America was a key driver of the improvements as earnings surged to $2.9 billion from $1.2 billion. The company sees more of the same in the coming quarters, citing better pricing and improved fixed costs that will offset higher commodity prices and an unfavorable mix.

The gains add to last year’s profit of $4.7 billion, the company’s best year in terms of earnings since 1999.

“GM has great potential to deliver profitable growth around the world as the recovery continues,” CFO Dan Ammann said. “While we’re encouraged, we keenly recognize we have more opportunities to leverage our scale, improve spending and investment efficiencies, and optimize our strong balance sheet.”