GM Earnings: Good 2024 Guidance Boosts Stock by Nearly 10%

We believe General Motors stock remains undervalued.

Dave Whiston 30 January, 2024 | 3:34PM
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In this photo illustration a General Motors Company logo seen displayed on a smartphone with a General Motors Company logo in the background.

Key Morningstar Metrics for General Motors

Fair Value Estimate: US$78.00
Morningstar Rating: 5 stars
Morningstar Economic Moat Rating: None
Morningstar Uncertainty Rating: High

What We Thought of General Motors’ Earnings

General Motors GM finished 2023 with a good fourth quarter—hindered by nearly $1 billion in UAW strike costs—and introduced 2024 guidance that suggests a good year ahead. We are not changing our fair value estimate, but we will reassess all modeling inputs while rolling our model for the 10-K.

Fourth-quarter adjusted diluted earnings per share of $1.24 fell 41.5% year over year but beat the $1.16 Refinitiv consensus. Adjusted EBIT of $1.8 billion fell by 53.8%, and EBIT margin declined by 470 basis points to 4.1%. Adjusted auto free cash flow of $1.3 billion fell by 70% but left GM with automotive cash and securities of $19.8 billion.

We think the market was primarily concerned with GM’s 2024 outlook going into the earnings release, so adjusted diluted EPS guidance of $8.50-$9.50 was good news relative to the $7.87 consensus and our projection of $8.39. Total company adjusted EBIT guidance of $12 billion-$14 billion suggests some upside potential from 2023′s $12.4 billion (down 14.6% from 2022), with profit cadence likely to follow GM’s typical seasonal pattern of seeing its strongest results in the second and third quarters. Adjusted automotive free cash flow is guided down from 2023′s $11.7 billion, to $8 billion-$10 billion, on possibly higher capital expenditure and working capital.

Guidance assumes an average share count of just below 1.15 billion and U.S. industry sales of about 16 million, including heavy trucks. It also assumes a pricing decline of 2.0%-2.5%, which we think is reasonable but could prove too conservative if pricing does not decline as fast as planned, which occurred in 2023. Mix is also a headwind due to more crossover volume (versus trucks and SUVs) and electric vehicle sales growth, as battery production on existing models like the Cadillac Lyriq improves this year. New EVs this year include the Escalade IQ SUV, the Equinox crossover, and the Sierra and Silverado RST pickups. China will struggle this year and have a first-quarter loss.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
General Motors Co47.57 USD0.36Rating

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Dave Whiston  is a guest author

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