Detroit, Mich. – October 3, 2024 General Motors Company, the world’s largest automaker by sales for the third consecutive year, will release its quarterly earnings before the opening bell on Wall Street. Investors and analysts are more than eager to see how the manufacturer is dealing with some rather difficult issues it currently faces, including problems in supply chain disruptions, material price inflation, and a constantly changing electric vehicle landscape. Here is how expectations from GM’s results with the next quarter on Wall Street are broken down:
Important Metrics to Track
Quarter details: Analysts are focusing on several important monetary trends for this quarter, such as EPS, revenue, and profit margin, which GM is going to report. Consensus of the surveyed analysts of Refinitiv and financial analysts forecast that in this quarter, the company will publish EPS at around $1.70 with revenue about $40 billion. This will be a case of year-over-year decline in earnings but modest growth in revenue from the same period last year.
Revenue would have been even higher, but for slight increases in volume and pricing overall, tempering the impact of the strong demand for GM’s pickup trucks and SUVs—traditional profit centres. Challenges within the electric vehicle segment, to which GM has committed significant resources, may also have placed a drag on profit growth.
Electric Vehicle Segment to Watch
One of the most paramount areas of concern for the investors will be GM’s prospects in the area of electric vehicles, which the company has put significant investment into over the past year. The company has set an ambitious target to go all-electric by 2035, which should place the automaker as one of the leaders as the world tilts away from traditional internal combustion engines.
Wall Street remains optimistic that GM’s future is secured in the EV space, but short-term challenges are expected. Supply chain bottlenecks led by uncertainties in receiving necessary materials such as semiconductors and lithium to use in battery production will impede production and hike the cost of production. The competitive nature of the EV space will also continue to put a pinching effect on pricing; this is because GM will compete with not only market leader Tesla but new entrants like Rivian and Lucid Motors.
General Motors CEO Mary Barra made a significant point about how it was going to accelerate production of electric vehicles, particularly where the company is introducing its new Ultium battery platform in its last earnings call. The talk on analyst calls would center around updates in the company’s production numbers regarding its electric models, such as the Chevrolet Silverado EV and the GMC Hummer EV, and how the company would adjust and take influence from future roll-out action.
Profit Margins and Supply Chain Challenges
Revenues will increase, but still compressed profit margins. Supply chain issues have been the bane of the car industry, and GM was no exception. In particular, a shortage in semiconductors wreaked havoc on production schedules and thereby cost pressures. While still better than their performance in the past year, supply chain issues are not as much of a pressure point for GM as they were several months ago, and the higher input costs to produce steel and aluminum, among others, are continuing to compress GM’s profit margins.
To counter such pressures, GM has undertaken a set of cost-cutting measures in addition to price cuts on some of its models. But with the inflationary pressures continuing and the world economy remaining more or less in a state of flux, analysts believe that GM’s profit margins will stay compressed for the short term.
Strike Impact and Labor Costs
Another factor that could therefore apply pressure on earnings for GM could be the United Auto Workers union’s strike demanding higher wages and improved benefits for its members. The strike, which started towards late September, already shut down operations in some of the most critical plants of GM. The company has since negotiated with the union to seek a resolution; however, the strike undoubtedly affected the operations of GM for the quarter.
Still, the actual loss due to the strike is not known, but analysts forecast that the loss in production and the paid labor during the strike would normally go into the bottom line of GM. These extra costs are likely a drag on GM’s profit margins in the near term, although the implications of the long-term depend on the effect of the negotiations with the labor force.
Global Operations and China Market
International operations, particularly in China, will be focused attention as the world’s largest automotive market, GM has a substantial share in the country through its joint ventures. Economic uncertainty and geopolitical tensions have, however, made the Chinese market relatively turbulent, and the company has been witnessing dropping sales in China in the recent quarters. Analysts will look forward to whether the company has reversed this trend in the recent quarter.
It also matters for the strategy of GM that is making its way into other emerging markets. There, it has invested in production and distribution network building. Analysts will keenly be looking for any updates on these initiatives and potential growth drivers for the coming quarters.
Wall Street’s Mood
Overall, Wall Street still holds cautiously optimistic sentiment toward GM, acknowledging it indeed stands at a crossroads—first, in the short term, and second, in longer terms, in terms of the transition to EVs. The strong balance sheet, strong product line, and commitment to innovation were among overarching factors seen as capable of helping GM navigate through such adverse waters.
According to Bloomberg, the stock of GM has been somewhat volatile in the past few days towards earnings, though analysts have a rather strong consensus “Buy” recommendation on the stock, with an average price target of around $50 per share and a huge upside over its current trading price. That calls for significant confidence on the part of investors that this automaker will be able to deliver above-market performance into the long term.
Conclusion
In the aftermath of GM’s soon-to-be released quarterly report, all eyes are focused on how the automaker has traversed economic headwinds while simultaneously positioning itself for growth in the future. A number of key areas will dominate this statement: these include how the electric vehicle segment is performing and how losses on profit margins incurred due to supply chain challenges and labor strikes are impacting its business bottom line, as well as the performance of its operations in the Chinese market. Still, Wall Street thinks the long term at GM is bright as the automaker accelerates transition into a future of all-electric vehicles.
Investors in General Motors are going to want some sense of these trends when the company reports earnings, and results can have a very big impact in the days before that event.
