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General Motors Battered and Bruised After Earnings

General Motors Co. (GM) is trading lower by more than 2% in the first hour of Tuesday’s session after beating Q3 2021 earnings-per-share (EPS) estimates by a wide margin while coming up short on revenue. The automaker posted a profit of $1.52 per-share during the quarter, much higher than $0.98 expectations, while revenue fell 24.5% year-over-year to $26.78 billion, missing consensus by more than $1 billion. Fiscal year 2021 guidance at the high end of prior metrics failed to sway exiting shareholders.

Playing a Numbers Game

Earnings before interest and taxes (EBITDA) hit $2.9 billion and a 10.9% profit margin while well-documented supply chain disruptions undermined income. A one-time settlement in the GM Financial division also boosted the number, making the result less palatable. Fiscal year 2021 EPS guidance between $5.70 and $6.70  feels like a wide range numbers game, with the company expressing more uncertainty than upbeat comments in CEO Mary Barra’s morning interview.

Barra noted on CNBC that trucks and full-sized SUVs are attracting the most buying interest while the company is selling every vehicle they can make, which isn’t surprising given chronic shortages. She also insisted that semiconductor supply will improve in Q1 2021, even though many companies have warned that disruptions could easily last into the second half.  This comment warrants skepticism, given false confidence offered by governments and businesses throughout this crisis,

Wall Street and Technical Outlook

Wall Street consensus has grown overly bullish in recent quarters, yielding a ‘Buy’ rating based upon 21 ‘Buy’, 1 ‘Overweight’, and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $53 to a street-high $95 while the stock opened Tuesday’s session just $2 above the low target. This dismal placement highlights the failure of analysts to accurately measure the impact of supply disruptions on U.S. corporations.

General Motors failed breakouts above the 2011 high at 38.95 in 2014 and 2017, leaving behind a shallow rising highs trendline. The stock slumped to an all-time low during the pandemic decline and shot higher, returning to trendline resistance at 50 in January 2021. An immediate breakout stalled below 64, giving way to an August support test that attracted willing buyers. It closed two-thirds of the distance to the prior high into this week’s report and has sold off, adding to rangebound action that could last well into the first quarter of 2022.

For a look at today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

This article was originally posted on FX Empire

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