GM Surpasses Expectations in Q3

By Nora Eckert and Nathan Gomes
DETROIT (Reuters) – General Motors (GM) exceeded Wall Street's expectations in Q3, with an 8% rise in shares thanks to strong consumer demand for trucks and SUVs.

CFO Paul Jacobson stated, "The consumer has held up remarkably well for us," anticipating improved demand next year as financing rates decline.

GM increased its pretax profit forecast for 2024, providing reassurance to investors concerned about possible declines in industry earnings amid high interest rates. The U.S. job market remains robust, supporting gasoline-powered SUV sales.

The stock saw a rally, reaching a two-and-a-half year high of $53.25 during morning trading. GM now expects a pretax profit between $14 billion and $15 billion, up from a previous estimate of $13 billion to $15 billion due to favorable pricing and consumer spending.

With adjusted earnings per share of $2.96 exceeding market expectations of $2.43, and revenue of $48.8 billion surpassing estimates of $44.6 billion, GM's CEO Mary Barra emphasized stability for the next year's profit outlook.

Pricing may soften, but GM anticipates support from cost reductions on SUVs and improvements in China, despite facing losses of $210 million in H1 and another $137 million in Q3 in that region. GM is restructuring operations in China and plans shareholder meetings focused on this division.

GM's stock has risen 36% this year, outpacing rivals Stellantis and Ford, which have faced challenges in quality and lower sales, respectively.

The EV Challenge

Investors remain concerned about automakers' electric vehicle (EV) losses amidst competition from affordable Chinese EVs and Tesla’s dominance in the U.S. market. GM is focused on developing a profitable EV and currently offers four EVs in its Cadillac lineup; Barra noted stronger luxury customer interest.

CFRA Research analyst Garrett Nelson warned GM might lose market share soon due to a lack of hybrids and anticipated cash flow strain from capital spending on EVs, which totaled about $2.3 billion in Q3, down from $2.53 billion a year prior.

Wedbush analyst Dan Ives viewed GM's performance and updated forecast as a positive sign amid market uncertainty. While GM's EV sales increased each quarter this year, they still accounted for about 4% of total U.S. deliveries.

As competition looms, particularly from low-cost Chinese manufacturers, GM is under scrutiny for its autonomous Cruise unit, which suffered a $400 million operating loss this quarter—improved from a $700 million loss a year earlier. Barra projected that this unit would not exceed $2 billion in losses by 2025.