General Motors (GM) earnings Q2 2024

Detroit — General Motors The company raised several key financial targets for 2024 after second-quarter profit well beat Wall Street expectations, while also restructuring loss-making businesses such as its self-driving cars and China operations.

The Detroit automaker now expects full-year adjusted earnings before interest and taxes of $13 billion to $15 billion and $9.50 to $10.50, up from previous guidance of $12.5 billion to $14.5 billion and $9 to $10. It also raised its forecast for adjusted automotive free cash flow and slightly lowered its range for net income attributable to shareholders by less than 1 percentage point.

Despite the strong earnings report, shares closed at $46.38 on Tuesday, down 6.4%, its worst daily drop since December 2022.

Wall Street analysts say investors are worried about a slowdown in growth businesses, less room for upside in the second half of the year and that automakers’ profitability has peaked.

“Impressive results given big losses in EV, cruise and China, and history suggests the good times won’t last,” Morgan Stanley analyst Adam Jonas said in a note to investors on Tuesday.

GM expects second-half profit to be $2.5 billion lower than the first half, said Tom Narayan of RBC Capital Markets, adding that Wall Street is losing hope for further guidance hikes, citing headwinds from GM’s China business.

“Many investors, who have been waiting for signs of price normalization after years of unprecedented inflation, will likely view GM’s comments as an important data point that we may be seeing the start of a deflationary cycle,” Narayan said.

Here’s how the company’s second-quarter performance compared to average estimates compiled by LSEG:

• Earnings per share: Adjusted earnings: $3.06 (expected: $2.75)
• Revenue: $47.97 billion (forecast: $45.46 billion)

GM’s Second Quarter Results Net income available to shareholders, excluding certain dividend payments, increased 14.3% to $2.93 billion from $2.57 billion in the fourth quarter of 2018. Earnings per share were $2.55, up from $1.83 in the fourth quarter of 2018. Adjusted earnings before interest and taxes were $4.44 billion, up 37.2%, and adjusted earnings per share were $3.06.

Adjusted net income was $2.88 billion, up 14.8 percent from the same period last year. GM said second-quarter sales rose 7.2 percent from $44.75 billion a year ago, setting a new quarterly record for the company.

“We had a really great first half and second quarter and we’re looking forward to another very strong year,” GM Chief Financial Officer Paul Jacobson said at a news conference. “We expect seasonal raw material cost increases and some pricing headwinds that we had anticipated in the second half of the year.”

In addition to the strong performance, GM on Tuesday said it would indefinitely halt production of its Cruise Origin self-driving vehicle and take special charges of about $600 million in the second quarter. It also said it was trying to restructure its joint venture with SAIC in China amid continuing losses, including a $104 million loss in second-quarter stock gains.

Jacobson said GM will continue to return money to investors as profits are strong and costs are being cut or deferred due to changes to its electric and autonomous vehicle plans.

Jacobson said the cost increases for the second half of the year include an additional $400 million in planned marketing spending compared to the first half of the year to promote new product launches, which he said are still down compared to the same period last year.

Rising sales of electric vehicles will also be a headwind, Jacobson said, because they are not expected to contribute as positively to GM’s bottom line as its gasoline-powered vehicles.

As in recent years, GM’s North American operations These new products, driven by truck sales, were a big factor in the company’s second-quarter forecast beat and guidance increase, with vehicle pricing in particular showing stronger momentum than GM had expected at the start of the year, Jacobson said.

GM said the average transaction price in the second quarter was roughly $50,000 and incentives were below the U.S. industry average.

The North American unit posted adjusted earnings of $4.43 billion during the quarter, up about 40% from the same period a year ago. Margin was 10.9%, up 2.3 percentage points from the year-ago period.

GM performed well in some areas but failed to achieve the expected return to profitability in China, where revenue fell sharply.

The automaker’s China operations posted an equity loss of $104 million, its second consecutive quarterly loss since hitting a nearly two-decade low in 2023.

“We have taken steps in China to reduce inventory, align production with demand and reduce fixed costs, but it is clear that the steps we took, while important, were not enough,” Jacobson said at a news conference. “We are working closely with our joint venture partners to restructure the business to ensure profitability and sustainability while ensuring that we do not require any additional capital.”

GM’s international operations, which include Korea, Brazil and the Middle East, reported second-quarter adjusted profit of $50 million, down 78.8% from a year ago. The finance division reported adjusted profit of $822 million, up 7.3% from a year ago.

GM continues to target manufacturing and auto wholesale Despite slower-than-expected adoption, North America is expected to have between 200,000 and 250,000 all-electric vehicles on the road.

EV shipments rose 40% year over year to 21,930 in the second quarter. Still, EVs only accounted for 3.2% of total US sales in the second quarter.

Jacobson reaffirmed that GM expects to be profitable on a production, or contribution margin, basis once EV production reaches 200,000 units by the fourth quarter.

“EVs will be a revenue headwind as the business scales, but should start to become an EBIT tailwind until variable margins become positive in the fourth quarter,” he said.

Jacobson declined to discuss any plans that might slow or stop the company’s future EV battery cell production in North America, except for two joint venture factories in Ohio and Tennessee where it currently makes cells with LG Energy Solutions.

“We will continue to follow our customers’ guidance as we rapidly scale cell factories 1 and 2,” Jacobson said. “We have no comment to make at this time.”

GM CEO Mary Barra said last week that the company’s goal of having 1 million electric vehicle production capacity in North America by the end of 2025 is now in serious doubt.