General Motors Set to Release Q3 2024 Earnings: Key Insights and Market Context

General Motors (NYSE:GM) is on the verge of releasing its Q3 2024 earnings report, and expectations are cautiously optimistic. Analysts anticipate earnings per share of $2.45 for the quarter, surpassing the consensus estimate and marking an increase of nearly 8% from the previous year. Revenue is projected to rise approximately 1% year-over-year to reach $44.7 billion. This year, GM’s stock has surged by 34%, fueled by expectations of improved profitability and solid truck sales. In contrast, Ford stock (NYSE:F) has dipped almost 10% in the same timeframe. For a deeper look at GM’s earnings outlook, refer to our analysis.

Current Sales Trends Show Mixed Results

Retail automotive sales have faced challenges recently, as U.S. consumer confidence wanes and high-interest rates make vehicle financing more costly. In its recent delivery data, GM reported a 2.2% decline in sales year-over-year, largely driven by an 18% drop in fleet sales. On a brighter note, retail sales increased by nearly 3%, with growth from GMC, Cadillac, and Buick brands slightly countered by weaker performance in Chevrolet, particularly in its car and Silverado pickup sales. Encouragingly, GM achieved record electric vehicle deliveries, with 32,095 units sold last quarter, a striking increase of nearly 60% from the previous year.

Pricing Dynamics and Market Implications

On the pricing front, GM’s sales of more affordable models, such as the Chevrolet Trax and Equinox EV, have risen. Fortunately, the company has managed to keep incentives steady, ensuring overall pricing remains stable. The impact of GM’s new contract with the United Auto Workers, approved last November, appears to be more tempered than initially feared. Despite an 11% wage increase under the new agreement, GM raised its adjusted pre-tax profit forecast for this year to between $13 billion and $15 billion, up from a prior estimate of $12.5 billion to $14.5 billion.

Stock Performance Over Recent Years

GM’s stock performance over the past four years has been inconsistent and more volatile compared to the S&P 500. Returns fluctuated significantly, with gains of 41% in 2021, a loss of 42% in 2022, and an 8% gain in 2023. For comparison, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has demonstrated less volatility and outperformed the S&P 500 every year in the same stretch. Given the current uncertain economic climate, including potential rate cuts and geopolitical conflicts, GM may face performance challenges akin to those in 2022 and 2023. The question remains: will GM rebound or continue to lag behind the S&P 500 over the next year?

Mixed Market Signals and Opportunities Ahead

Despite concerns within the automotive sector, there are silver linings for GM. The slow transition to electric vehicles (EVs) previously hindered the stock, but a slowdown in EV demand could allow GM more time to capitalize on gasoline vehicle sales while investing in future electric developments. Additionally, recent shifts in U.S. monetary policy may serve as a boon. The Federal Reserve’s recent 50 basis point rate cut—the first in nearly four years—reduces the benchmark federal funds rate to a range of 4.75% to 5%. This reduction could ease borrowing costs, potentially boosting demand for high-ticket items like vehicles and benefiting automotive companies including GM.

Stock Valuation and Outlook

Currently, GM’s stock trades around $48 per share, just under six times its projected 2024 earnings. Our price estimate for GM stands at $43, slightly below the market price. We will revise this estimate following the upcoming earnings release. For further insights into GM’s valuation, consider our detailed analysis on General Motors Valuation: Expensive Or Cheap. You can also explore GM’s business model and revenue strategies through our dashboard on General Motors Revenue: How GM Makes Money.

[1] Returns as of 10/16/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.