GM stock jumps 7.8% on Q4 sales and profit beat, bullish 2024 profit outlook
GM CEO Mary Barra said EV growth has slowed, which has 'created some uncertainty.'
General Motors (GM) reported top and bottom line beats for the fourth quarter and issued 2024 full-year profit guidance that matched its initial forecast for 2023 on Tuesday. Shares of the automaker closed up 7.8%, with the stock hitting its highest levels since August 2023.
The upbeat earnings report comes as GM looks to shake off the effects of the UAW strike and recalibrate its electric vehicle rollout, which the company admits has "created some uncertainty."
For the quarter, GM reported topline revenue of $42.98 billion, beating the $39.53 billion consensus Bloomberg estimate, although this figure was down compared with the $43.1 billion the company reported in Q4 2022. On the profitability front, GM reported adjusted earnings per share of $1.24 versus the $1.16 estimated on adjusted EBIT (earnings before interest and taxes) of $1.757 billion, though that figure dropped 53.8% versus a year ago.
For the year, GM earned $12.4 billion in adjusted EBIT. In late November, GM reinstated its full-year outlook, expecting adjusted EBIT of $11.7 billion to $12.7 billion, compared with its previous outlook of $12 billion to $14 billion.
And it was last year's initial $12 billion to $14 billion range that GM now sees as its full-year 2024 adjusted EBIT forecast. The company also sees $8.50 to $9.50 in adjusted earnings per share for the year as well.
"Consensus is growing that the US economy, the job market and auto sales will continue to be resilient, and at GM, we expect healthy industry sales of about 16 million units with the mix of EVs continuing to grow," GM CEO and chair Mary Barra said in her shareholder letter.
EV growth
As for EV sales, GM suffered some hiccups in 2023 with its once-aggressive rollout, and some softness is expected this year. In fact, a company spokesperson said GM will have $1.7 billion in reserves for losses relating to existing EV inventory in Q4.
"It’s true the pace of EV growth has slowed, which has created some uncertainty," Barra said, though she expects GM to become "variable profit positive in the second half of the year" based on our current expectations for EV demand and production growth.
GM CFO Paul Jacobson also reiterated the company's goal for EV profitability in a roundtable call with reporters. "We won't get to low to single-digit profitability [EBIT EV margin] until 2025," he said.
GM, which abandoned its goal of building 400,000 EVs through mid-2024, now says it will sell at least 250,000 EVs in 2024, depending on customer demand. The company did not say whether it still expects to have 1 million units of EV capacity by 2025.
Barra reiterated on the earnings call that the company has the ability to refocus production and "flexibility" to build more hybrids if necessary but that EV growth is the top priority for the company.
In addition to reinstating its profit outlook last November, GM revealed a $10 billion “accelerated share repurchase” (ASR) program with the intention of boosting its common stock dividend by 33% starting in January. As opposed to a traditional staged share buyback, GM says its program will begin immediately.
"Everyone on the team is focused on strong execution to sustain our momentum and create shareholder value, and we are deeply committed and accountable to do exactly that," Barra said in her letter.
Impact of strikes
Despite the UAW work stoppage, GM’s sales for Q4 were not dramatically affected, as the company said it had built up sufficient inventory in anticipation of the strike. Earlier in January, GM reported Q4 US sales increased 0.3% compared to the same period a year ago, with roughly 625,176 cars and trucks sold.
Overall, GM said sales jumped 14.1% to 2.6 million vehicles for 2023, making it the company's best year since 2019. The automaker also grew its market share by 0.3% to 16.3% overall in the US. GM said it was No. 1 in full-size pickup sales in the US (841,000 units) and No. 1 in full-size SUV sales (245,000 units).
GM also forecast total US auto industry sales to hit 16 million in 2024, which would be a strong improvement post-pandemic; only 13.4 million vehicles were sold in 2022, the lowest in a decade.
Overseas, however, is a different matter for GM. Jacobson said GM is projecting a loss in China for Q1. “We’re gonna have a tough first quarter there,” he said.
Another hiccup for GM involved issues related to its Cruise AV business unit. In November, Cruise paused all autonomous activities across the country after an accident in which a Cruise robotaxi ran over a woman, stopped on top of her, and then dragged her for about 20 feet before pulling over. The woman suffered severe injuries from the accident. A few weeks later, Kyle Vogt, CEO of GM’s Cruise autonomous driving division, announced he was resigning from his role and leaving the company.
Late last week, Cruise revealed it was under investigation by the Department of Justice and SEC, among other regulatory bodies, concerning the incident with the pedestrian and Cruise’s actions in the immediate aftermath of the event.
“At Cruise, we are committed to earning back the trust of regulators and the public through our commitments and our actions,” Barra said.
"This was an important quarter to help regain Street confidence that has been shaken the last few quarters with the EV vision in flux and Cruise black eye," Wedbush analyst Dan Ives tweeted on Tuesday morning. "GM said it would spend $1 billion less on Cruise than in '23."
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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