Why is General Motors (GM) down 2.5% since its last earnings report?

About a month has passed since General Motors (GM) last reported earnings. Shares have lost about 2.5% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is General Motors due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

General Motors’ best first-quarter earnings estimates

General Motors reported first-quarter 2024 adjusted earnings of $2.62 per share, beating the Zacks Consensus Estimate of $2.08. The bottom line also increased from $2.21 in the year-ago quarter. Solid performance of the GMNA segment led to improved results. Revenues of $43.01 billion surpassed the Zacks Consensus Estimate of $41.28 billion, up from the $39.9 billion reported in the year-ago period.

The US auto giant reported adjusted earnings before interest and taxes (EBIT) of $3.87 billion, slightly up from $3.8 billion in the year-ago quarter. The automaker’s GM market share in the quarter was 8.1%, compared with 8.7% in the same quarter last year.

Segment efficiency

GM North America (“GMNA”) generated net revenues of $36.1 billion, compared to $32.9 billion recorded in the same period in 2023. This amount also exceeded our model forecast of $33.5 billion for higher-than-expected deliveries. Vehicle wholesale sales at the GMNA unit were 792,000 units, compared to 723,000 units recorded in the same quarter last year. This number also exceeded our estimate of 718,000 units. The segment’s operating profit was $3.84 billion, compared to $3.57 billion reported in the same period last year. This metric also exceeded our estimate of $2.75 billion.

International GMThe company’s net revenue (“GMI”) for the reported quarter was $3.08 billion, compared to $3.72 billion in the year-ago quarter. The metric also missed our estimate of $3.96 billion due to lower-than-expected deliveries. Vehicle wholesale sales in this segment, at 104,000 units, declined from 141,000 units in the same quarter last year and also exceeded our forecast of 148,000 units. GMI reported an operating loss of $10 million compared to a profit of $347 million generated in the year-ago period due to low equity returns. According to our estimates, operating profit amounted to USD 464.7 million.

GM Financial generated net revenue of $3.81 billion in the quarter, up from $3.34 billion reported in the year-ago period and ahead of our forecast of $3.48 billion. The segment reported EBIT-adjusted operating profit of $737 million, compared to $771 million reported in the same period last year. The metric exceeded our forecast of $691 million.

The story continues

GM Cruise reported net revenue of $25 million in the fourth quarter, flat year over year. The data was also in line with our forecast. The segment posted an operating loss of $442 million, narrower than the $561 million loss recorded in the prior-year quarter. However, the reported loss was wider than our estimate of a loss of $358 million.

Financial position

As of March 31, 2024, General Motors had cash and cash equivalents of $17.64 billion. Long-term debt in the automotive industry was $15.9 billion at the end of the quarter. Automotive net cash from operations was $3.6 billion in the quarter. The company reported adjusted automotive free cash flow of $1.09 billion in the first quarter of 2024, a significant improvement from the negative $132 reported in the year-ago period.

GM declared a second-quarter dividend of 12 cents per share. The dividend will be paid on June 20, 2024 to shareholders of record as of June 7, 2024.

Revised guidelines for 2024

GM now expects full-year 2024 adjusted EBIT of $12.5 billion to $14.5 billion, up from previously expected $12 billion to $14 billion. Adjusted EPS is projected in the $9-$10 range, down from $8.50-$9.50 previously pegged. Automotive adjusted free cash flow is expected to be $8.5 billion to $10.5 billion, higher than the previous forecast of $8 billion to $10 billion. Capital expenditures are expected to be $10.5 billion to $11.5 billion, up from previous estimates of $10 billion to $11 billion.

How have estimates changed since then?

It turns out that estimate revisions have been trending upwards over the past month.

As a result of these changes, the consensus estimate moved by 14.14%.

VGM results

Currently, General Motors has an average Growth Score of C, but its Momentum Score is performing slightly better at a B. Plotting a somewhat similar path, the stock is rated an A on the value side, placing it in the top quintile for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. Notably, General Motors carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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