By Positive Momentum Fuels Investor Confidence
General Motors (GM) has been making great strides, with its shares experiencing a remarkable surge. As of Monday’s close, the stock had increased by an impressive 26% since mid-November. This surge is attributed to several key factors including a labor deal with the United Auto Workers spanning over four years, and plans to raise dividends. In comparison, Ford Motor, Stellantis, and Toyota Motor have also witnessed positive returns; however, GM’s outperformance remains notable. Notably, Tesla stock has seen a decline of almost 20% during the same period, while the S&P 500 has shown a modest 9% increase.
Investors are eagerly anticipating GM’s upcoming quarterly results, as the current upward trend indicates the potential for positive news. Crucially, the first step towards exceeding expectations lies in surpassing Wall Street’s estimates for earnings. Bloomberg reports that the market projects an operating profit of $1.9 billion and earnings per share of approximately $1.16 from sales amounting to $39.5 billion in the fourth quarter.
These results are poised to be unveiled before the market opens on Tuesday, offering valuable insights into GM’s performance. It is worth noting that in the same period last year, GM reported an operating profit of $2.6 billion and earnings per share of $2.21 through sales amounting to $43.1 billion. While US sales volumes maintained stability year-over-year in the fourth quarter, GMC and Cadillac sales saw a slight decline of 6.5% and 7%, respectively. These models are typically associated with higher price points, adding further significance to the figures.
Additionally, it is important to acknowledge the effects of the strike that took place last summer against the Detroit Three auto makers. This strike, as noted by Freedom Capital Markets analyst Mike Ward in an earnings preview report, resulted in an approximate operating profit loss of $1.3 billion for GM.
As the anticipation builds, investors eagerly await GM’s fourth-quarter earnings report, poised to make a significant impact on the company’s trajectory.
GM Forecasts for 2024
Wall Street is projecting an operating profit of $10.8 billion and EPS of $7.70 for General Motors (GM) in 2024. However, GM has a track record of exceeding its initial guidance in the last three years, despite unexpected events each year. This is one reason why Brian Ward, an analyst, has higher forecasts for GM in 2024. He predicts an operating profit of $12.9 billion and EPS of $9, even rating the shares as a Buy with a $60 price target.
GM had previously informed investors that they could expect an operating profit ranging from $10.5 billion to $12.5 billion at the beginning of 2023. Despite challenges such as higher interest rates and a weeks-long UAW strike, GM is expected to hit the lower end of that range.
Despite GM’s recent gains, its stock currently trades at approximately 5 times the per-share profit expected to be produced in 2024. It is common for traditional auto makers, including GM, to have lower multiples of earnings due to concerns about the cyclicality of their earnings and uncertainties surrounding the transition to electric vehicles.
GM will be hosting a conference call at 8:30 a.m. Eastern time to discuss their results. Options markets predict a potential 4% movement in the stock following the earnings release, in either direction. In the past four quarterly reports, the stock has experienced roughly a 4.5% increase or decrease. It is important to note that the stock has risen once and fallen three times during this timeframe.
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