Earnings Preview: General Motors’ Q3 results likely to benefit from EV growth

General Motors Co. (NYSE: GM) is expected to report its third-quarter results on October 22. The company is working towards the goal of achieving operating profit in its rapidly growing electric vehicle business by year-end. The EV-focused shift in business model is expected to help the automotive giant revive its underperforming models and return to the growth path.  

General Motors’ stock price has nearly doubled after slipping to a three-year low about 12 months ago. The stock, which has gained 37% so far this year, often underperformed the S&P 500 in recent years. The company’s plan to exit the internal combustion engine business in the long term reflects its commitment to embracing an all-new identity, which could translate into shareholder value.

Estimates

The auto giant is preparing to publish its third-quarter 2024 financial results on Tuesday, October 22, at 6:30 am ET.  Analysts’ consensus revenue estimate is $44.6 billion, representing a 1% year-over-year increase. Adjusted profit, on a per-share basis, is seen increasing to $2.42 per share in the September quarter from $2.28 per share in Q3 2023.

Of late, the carmaker has been busy ramping up electric vehicle production, and it has built large battery production facilities in the US. The aggressive EV push is significant considering the company’s dismal performance in China in recent years due to adverse market conditions including strong competition from local manufacturers in the EV space. Overall, GM targets to produce between 200,000 and 250,000 EV units this year.

EV Sales Jump

In the third quarter, EV sales surged 60% annually to a record high, reflecting continued market share growth in that segment. In China, total vehicle sales by the company and its joint venture partners grew about 14% sequentially in the third quarter. The GM leadership claims to have achieved significant cost savings by manufacturing EVs in the company’s existing factories, originally designed for gas-powered vehicles.

“We had expected to return to profitability in China in the second quarter. However, we reported a loss and we expect the rest of the year will remain challenging because the headwinds are not easy. We are working closely with our JV partner to restructure the business to make it profitable and sustainable. I’ll close my opening comments by recognizing the progress Cruise has made over the last several months,” GM’s CEO Mary Teresa Barra said in a recent interaction with analysts.

Q2 Outcome

In the June quarter, adjusted earnings jumped 60% year-over-year to $3.06 per share, reflecting positive top-line performance. Unadjusted net income was $2.93 billion or $2.55 per share in Q2, compared to $2.57 billion or $1.83 per share in the year-ago period. Revenue increased 7% year-over-year to $48 billion in the June quarter, with strong contributions from the GM North America division which accounts for about 85% of total sales.

On Wednesday, shares of GM opened higher and traded slightly below $50 in the early hours of the session. They have grown about 15% in the past six months.