General Motors (GM) recently delivered a significant earnings surprise for the third quarter of 2023, exceeding Wall Street expectations in both earnings per share (EPS) and revenue. The automotive giant reported adjusted earnings of $2.96 per share against analysts’ expectations of $2.43, alongside revenues reaching $48.76 billion compared to the anticipated $44.59 billion. This impressive performance marks GM’s persistent trajectory of exceeding market forecasts, a pattern the company has maintained for the last nine quarters regarding EPS and eight quarters for revenue.
Revised Financial Projections for 2024
Following their substantial third-quarter performance, GM has revised its financial guidance for the upcoming year. The company now expects its adjusted earnings before interest and taxes (EBIT) to range between $14 billion and $15 billion, equating to an adjusted EPS of $10 to $10.50. This is an increase from previous guidance which estimated EBIT figures between $13 billion and $15 billion and an EPS of $9.50 to $10.50. Additionally, GM has revised its forecast for adjusted automotive free cash flow, now expecting it to fall between $12.5 billion and $13.5 billion, up significantly from a previous range of $9.5 billion to $11.5 billion. This marks GM’s third revision of guidance within the same fiscal year—an indicator of the company’s robust operational performance, particularly in North America.
Factors Driving the Strong Performance
The company attributes its success to strong pricing strategies that have effectively counterbalanced challenges in international markets. Despite experiencing losses in China and a year-over-year rise in labor and warranty costs—which increased by $200 million and $700 million, respectively—GM’s solid pricing power allowed it to maintain a high average transaction price per vehicle, which remained above $49,000 for the quarter. GM’s Chief Financial Officer, Paul Jacobson, expressed confidence in the consumer’s resilience, stating that their market stability has been consistent over recent quarters.
During this period, GM’s revenues rose by 10.5% from the previous year, showcasing a net income of $3 billion. A notable contributor to this performance was the strategic advancement of truck production, which resulted in a $400 million boost to adjusted earnings. North American operations were a standout, with adjusted EBIT reaching nearly $4 billion—an increase of 12.9% year over year—yielding an impressive adjusted profit margin of 9.7%.
While North America catalyzes GM’s growth, international markets present ongoing challenges. In China, GM reported a substantial loss of $137 million due to restructuring efforts, amid widely reported issues facing foreign automakers in that market. Furthermore, the company’s other international operations experienced an increased deficit, with adjusted earnings plummeting by 88.2%, resulting in austere adjustments amounting to merely $42 million. These losses underline the pressing need for GM to reassess its strategies in foreign markets, particularly in regions that are increasingly competitive.
Additionally, GM’s venture into the autonomous vehicle sector through its Cruise division has been a notable area of concern. The Cruise segment recorded substantial losses, tallying around $1.3 billion for the year to date, with $383 million attributed to the third quarter alone. Attention from investors is keenly fixed on how GM plans to fund this division moving forward and what strategic measures it will implement in the wake of these financial stresses.
As GM moves forward, all eyes will be on the automaker’s January announcement regarding full-year guidance for 2025, which promises to address several unanswered questions raised during recent investor calls, particularly surrounding electric vehicle (EV) sales and plans to counter challenges faced in the international markets.
The strong results naturally led to a positive response from the stock market, with GM shares seeing a lift of approximately 3% in premarket trading following the announcement. Over the calendar year, GM’s stocks have risen nearly 36%, a boost attributed in part to strategic buybacks that have substantially reduced outstanding shares by 19% year-over-year. As GM positions itself for continued growth, it remains essential for the automaker to lean into its North American successes while adeptly addressing the hurdles presented in other markets and segments, ensuring a resilient future in the evolving automotive landscape.