General Motors exceeded expectations in its third-quarter results, reporting revenues of $48.8 billion and earnings per share of $2.96. The company’s stock surged over 45% this year amid a struggling automotive market. GM’s inventory levels remain healthier than competitors, allowing it to defend average prices. With raised targets for 2024, GM anticipates significant increases in operating profit and cash flow. CEO Mary Barra emphasized the intense competition and regulatory challenges ahead but expressed confidence in their strategic direction.
(BFM Bourse) – The Detroit-based automotive giant has once again surpassed expectations with its third-quarter earnings, prompting an increase in its forecast. As a result, the company’s stock has surged on Wall Street, climbing over 45% since the beginning of the year.
While the automotive sector has been struggling in the stock market this year, particularly in Europe—with major players like BMW, Mercedes-Benz, Volkswagen, Aston Martin, and Stellantis all issuing serious earnings warnings last month—General Motors has shown remarkable resilience.
In its latest financial report, General Motors announced third-quarter revenues of $48.8 billion, significantly outperforming the LSEG consensus of $44.59 billion, as reported by CNBC. The earnings per share, a key metric for investors, came in at $2.96, exceeding the consensus estimate of $2.43 and surpassing last year’s figure of $2.28.
“In the third quarter, we captured a larger share of the U.S. retail market through competitive pricing, effective inventory management, and reduced rebates,” stated CEO Mary Barra in a letter addressed to shareholders.
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Strong Pricing Strategies
While Stellantis and Ford are grappling with substantial inventory levels in the US, necessitating sales strategies like price reductions on older models, General Motors is in a comparatively advantageous position. According to data from the Royal Bank of Canada, as of September, Ford’s inventory days were at 91, Stellantis at 90, while General Motors maintained a much healthier 68 days.
This favorable inventory situation allows General Motors to uphold its average sales prices. During a recent conference call, CFO Paul Jacobson revealed that the group’s average transaction price in the third quarter remained above $49,000.
Jacobson remarked, “Consumer demand has been surprisingly strong.” He noted, “The trends we’ve observed in previous quarters continue to hold true.”
Thanks to disciplined pricing and effective cost management, the company reported an operating profit of $4.1 billion, up from $3.6 billion year-on-year and above the $3.3 billion consensus forecast from Wedbush. The adjusted operating margin increased to 8.4%, reflecting a rise of 30 basis points compared to the previous year.
Notably, the positive contributions from sales volume ($900 million) and pricing ($1 billion) were offset slightly by a $600 million negative impact due to the mix, largely influenced by the ramp-up of electric vehicle sales, which currently feature lower profit margins.
General Motors also reported an adjusted free cash flow of $5.8 billion compared to $4.9 billion from the previous year.
Facing Fierce Competition
By the end of the quarter, General Motors revised several of its targets for 2024. The automotive operating profit is now anticipated to be between $14 billion and $15 billion, adjusted cash flow projected at $12.5 billion to $13.5 billion, and adjusted earnings per share expected to range from $10 to $10.5. This marks the third consecutive upward projection from the company.
On Wall Street, shares soared 8% around 5:15 PM, marking an impressive advance of 46.8% for the full 2024 year, placing General Motors well ahead of competitors like Ford (-9.6%), Tesla (-13%), and Stellantis (-44%).
‘General Motors has reported outstanding results for the quarter ending in September, greatly exceeding investor expectations for sales and net income, capitalizing on substantial benefits from its strategic investments and increased production,’ noted Dan Ives of Wedbush. He believes the company is making significant progress in navigating the current market challenges.
Mary Barra added in her letter to shareholders, ‘We must remain vigilant; we are not equating progress with success. The competition is intense, and the regulatory landscape will only become more complex. Therefore, we are dedicated to optimizing the margins of our internal combustion engine vehicles while striving to make our electric vehicles profitable as soon as feasible.’