DETROIT — General Motors is raising several key financial targets for 2024 after easily beating Wall Street’s earnings expectations for the second quarter, while it restructures money-losing operations such as autonomous vehicles and its China business.
The Detroit automaker now expects full-year adjusted earnings before interest and taxes of between $13 billion and $15 billion, or $9.50 and $10.50, up from previous guidance of $12.5 billion to $14.5 billion, or $9 and $10, previously. It also raised its adjusted automotive free cash flow forecast, while slightly lowering the range for its net income attributable to stockholders by less than 1%.
Despite the solid financial results, shares closed Tuesday at $46.38, down 6.4% — marking the stock’s worst daily decline since December 2022.
Investors balked at pullbacks in growth businesses, waning upside during the second half of the year, and fear that the automaker’s earnings power has peaked, according to Wall Street analysts
“Impressive results considering large losses in EVs, Cruise and China. History suggests the good times won’t last,” Morgan Stanley analyst Adam Jonas said Tuesday in an investor note.
RBC Capital Markets’ Tom Narayan pointed to expectations from GM that earnings during the second half of the year will be $2.5 billion lower than earnings in the first half. He also cited GM’s China business as a headwind and said Wall Street is losing hope for an additional guidance raise.
“Many investors who have been waiting for the price normalization narrative to take place after years of unprecedented inflation, likely see the GM commentary as an important data point that we could be at the beginning of a deflationary cycle,” Narayan said.
Here’s how the company performed in the second quarter, compared with average estimates compiled by LSEG:
- Earnings per share: $3.06 adjusted vs. $2.75 expected
- Revenue: $47.97 billion vs. $45.46 billion expected
GM’s second-quarter results included net income attributable to stockholders, which excludes some dividend payouts, of $2.93 billion, up 14.3% from $2.57 billion a year earlier. On a per-share basis, GM reported earnings of $2.55, up from $1.83 a year earlier. Adjusted earnings before interest and taxes came in at $4.44 billion, up 37.2%, and adjusted earnings per share were $3.06.
Its unadjusted net income was $2.88 billion, up 14.8% from a year earlier. GM said its revenue for the second quarter was a fresh quarterly record for the automaker, up 7.2% compared with $44.75 billion a year earlier.
GM’s stock performance in 2024.
“It was truly a great first half and second quarter, and we’re positioned to have a very strong year,” GM CFO Paul Jacobson said during a media briefing. “We expect to see some seasonally higher commodity costs, as well as some pricing headwinds that we’ve assumed in the second half of the year.”
Alongside the strong earnings, GM on Tuesday said it is indefinitely pausing production of its Cruise Origin autonomous vehicle, triggering a roughly $600 million special charge in the second quarter. It also said it’s attempting to restructure a joint venture in China with SAIC amid continuing losses, including a $104 million loss in equity income during the second quarter.
Jacobson said GM will continue to return money to investors amid its strong profits as well as changes to its electric- and autonomous-vehicle plans, which are lowering or delaying costs.
Jacobson said increased costs during the second half of the year will include an additional $400 million in planned marketing spend compared to the first half of the year to promote new launches. That spend is still down compared to the same time a year earlier, he said.
Increasing sales of EVs also will be a headwind, as they are not expected to contribute as positively to earnings as GM’s gas-powered models, Jacobson said.
North America leads
As they have in recent years, GM’s North American operations, driven by truck sales, were largely responsible for the company’s second-quarter beat and guidance raise. Specifically, pricing on the vehicles has remained more resilient than GM anticipated at the beginning of the year, according to Jacobson.
GM said its average transaction price during the second quarter was roughly $50,000, with incentives lower than the U.S. industry average.
The North America division increased adjusted earnings during the quarter to $4.43 billion, up nearly 40% from a year earlier. The unit reported a profit margin of 10.9%, up 2.3 percentage points from a year earlier.
While GM outperformed in several areas, it did not achieve an anticipated return to profitability in China, where the automaker has experienced significant declines in earnings.
The automaker’s Chinese operations posted an equity loss of $104 million – its second consecutive quarterly loss after hitting a roughly 20-year low in 2023.
“In China, we’ve been taking steps to reduce our inventories, align production to demand, and…
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