Fiona Nanna, ForeMedia News

5 minutes read. Updated 2:59AM GMT Mon, 28th October, 2024

In a striking performance, General Motors (GM) has significantly exceeded Wall Street’s earnings expectations for the third quarter of 2024, prompting the automaker to revise its guidance upward for the upcoming year. The company reported adjusted earnings per share (EPS) of $2.96, surpassing analysts’ forecasts of $2.43, while revenue reached $48.76 billion compared to the anticipated $44.59 billion.

This marks the third consecutive quarter in which GM has updated its earnings outlook after outperforming expectations, largely driven by robust sales in its North American market.

Revised Earnings Forecast

In light of its strong performance, GM has adjusted its full-year earnings forecast, now expecting adjusted earnings before interest and taxes (EBIT) to fall between $14 billion and $15 billion, translating to $10 to $10.50 per share. This is an increase from the previous estimate of $13 billion to $14 billion. Additionally, the automaker raised its adjusted automotive free cash flow forecast to between $12.5 billion and $13.5 billion, up from $9.5 billion to $11.5 billion.

Furthermore, GM has narrowed its net income projection for common stockholders to between $10.4 billion and $11.1 billion, which translates to $9.14 to $9.64 per share. This adjustment is a revision from earlier guidance, which estimated net income between $10 billion and $11.4 billion.

Caution Ahead

Despite the positive outlook, GM Chief Financial Officer (CFO) Paul Jacobson cautioned that earnings are expected to decrease in the fourth quarter due to factors such as the timing of truck production, seasonal fluctuations, reduced wholesale volumes, and a higher mix of electric vehicle sales.

In the wake of this announcement, GM’s shares surged over 8% in morning trading on Tuesday, reaching a new 52-week high.

Consistent Earnings Outperformance

GM has consistently outperformed Wall Street expectations, posting higher EPS for nine consecutive quarters and beating revenue estimates for eight straight quarters. This success can be attributed to strong vehicle pricing, which has helped offset challenges in international markets, particularly in China, where the company is restructuring operations.

For the third quarter, GM reported a net income of $3 billion, a slight increase compared to the previous year, with revenue rising 10.5% from around $44 billion. The automaker’s average transaction price per vehicle remained robust, exceeding $49,000 from July through September, showcasing the resilience of consumer demand.

Regional Performance Insights

The bulk of GM’s earnings growth came from its North American operations, which reported adjusted EBIT of nearly $4 billion, a 12.9% increase year-over-year, resulting in a 9.7% adjusted profit margin. However, this success stands in stark contrast to GM’s performance in China, where the company experienced a $137 million loss, alongside a staggering 88.2% drop in adjusted earnings from other international markets, totaling $42 million.

The earnings report also highlighted a 7.3% decline in adjusted earnings from GM’s financing arm, which reported $687 million during the quarter. Furthermore, GM’s autonomous vehicle division, Cruise, has incurred losses amounting to roughly $1.3 billion through September, including a loss of $383 million in the third quarter.

Looking Ahead

The quarterly report comes shortly after GM’s investor day, where executives indicated that the company expects its earnings strength to continue into 2025. Full guidance for 2025 will be revealed in January. However, several key topics remain on the minds of investors, including GM’s funding strategies for its Cruise unit, details on restructuring efforts in China, and updates regarding its electric vehicle sales and plans.

Jacobson expressed optimism about the situation in China, stating, “We think we can turn it around,” and mentioned that the company has scheduled several meetings with its Chinese partners to discuss the restructuring and potential cost reductions.

As of Monday’s close, GM shares have risen approximately 36% this year, buoyed by significant buybacks that have led to a 19% year-over-year reduction in outstanding shares. With its strategic adjustments and strong performance, GM appears poised for continued growth in a competitive automotive landscape.

Focus Keywords:

  • General Motors earnings guidance
  • GM third-quarter performance
  • North American automotive market
  • GM Cruise autonomous vehicle unit

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General Motors surpasses Wall Street expectations for Q3 earnings, raising 2024 guidance amid strong North American performance. Discover the insights and outlook for the automaker’s future.