General Motors Co. experienced a robust surge in its stock, with a remarkable 6% increase on Tuesday, fueled by an impressive performance in the fourth quarter that surpassed expectations. The company reported results that outpaced estimates, showcasing a revenue that exceeded consensus by approximately $4 billion, coupled with an optimistic outlook.
In a letter to shareholders, Chief Executive Mary Barra expressed confidence in the resilience of the U.S. economy, job market, and auto sales. She anticipates a robust industry sales figure of around 16 million units, with a continual growth in the electric vehicle (EV) segment. Barra's positive sentiment resonated with investors, contributing to the surge in the company's stock value.
For the fourth quarter, General Motors posted a net income of $2.102 billion, equivalent to $1.59 per share. This marked an improvement from the year-earlier period, where the net income stood at $1.999 billion, or $1.39 per share. Adjusted earnings per share were reported at $1.24, surpassing the FactSet consensus of $1.16.
While there was a slight dip in revenue from $43.108 billion to $42.980 billion, it still outperformed the FactSet consensus of $38.809 billion. This robust financial performance was viewed as a significant turnaround, particularly after facing challenges in the electric vehicle sector in previous quarters.
Wedbush analyst Dan Ives applauded the solid numbers, emphasizing their crucial role in restoring confidence in the company. Given General Motors' substantial transformation towards electric vehicles, this quarter's performance served as a pivotal moment, affirming that profit margins and growth targets remained on track despite past uncertainties.
Ives reiterated an outperform rating on the stock, with a target stock price of $40. However, CFRA analyst Garrett Nelson urged caution despite the positive earnings, guidance, and a $10 billion share buyback program. Nelson pointed to uncertainties surrounding General Motors' long-term plans for electric vehicles and its less competitive labor cost position.
Barra outlined the company's commitment to expanding its electric vehicle business, citing plans to relaunch the self-driving Cruise business. Despite recent challenges, including the revocation of Cruise's license in San Francisco, General Motors remains steadfast in its pursuit of innovation and technological advancement.
Barra expressed optimism about the electric vehicle portfolio, expecting the U.S. segment to turn variable profit positive in the second half of the year. She cited factors such as growing interest in their vehicles, lower commodity prices, and overall positive expectations for EV demand and production growth.
While the electric vehicle market has faced some growth challenges, Barra highlighted third-party forecasts predicting an increase in U.S. EV deliveries from 7% in 2023 to at least 10% in 2024. This positive outlook aligns with General Motors' strategic focus on expanding its presence in the electric vehicle segment.
Looking ahead, General Motors anticipates 2024 earnings per share (EPS) in the range of $8.50 to $9.50, surpassing the FactSet estimate of $7.75. The company also expects capital expenditures (capex) to be between $10.5 billion and $11.5 billion, inclusive of investments in battery cell manufacturing joint ventures.
Evercore ISI analysts characterized General Motors' earnings per share guidance as "whopping," emphasizing the company's renewed strength. Despite challenges faced in the recent past, the internal combustion engine (ICE) business is portrayed as operational and thriving.
Over the last 12 months, General Motors' stock has exhibited a 5% gain, while the S&P 500 has seen a more substantial increase of 22.7%. The positive momentum in the stock reflects the market's renewed confidence in General Motors' strategic direction and financial outlook.
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