General Motors just raised its earnings outlook for the third time in a row.
General Motors (GM 10.30%) gave a shout of joy to its shareholders today. The better-than-expected third-quarter results allow the company to continue the trend marked by this year’s earnings report.
GM has raised its 2024 cash flow outlook and net income for the third consecutive quarter. As a result, GM stock has risen more than 50% this year. That includes today’s moves, with the stock up 10.4% as of 3:10 p.m. ET.
Investors focus on profits
Third-quarter sales were $48.8 billion, up 10.5% year-over-year and beating expectations by more than $4 billion. The company’s operating profit (adjusted profit before interest and taxes), which is widely watched, also rose significantly, exceeding expectations. The company raised its full-year guidance for this metric to a range of $14 billion to $15 billion. This is $1 billion higher on the lower end than previous guidance.
So what’s going so well for General Motors? On the company’s investor conference call, CEO Mary Barra said what investors want to hear. GM is working hard to optimize profit margins on both traditional internal combustion engine (ICE) and electric vehicle (EV) products.
These efforts appear to be bearing fruit, as evidenced by the fact that the full-year profit margin has been adjusted to positive. Barra said that while GM remains in the red on EVs, the company is on track to produce and wholesale about 200,000 units in North America this year. He also said the product’s profitability exceeds its variable costs. Although this is a first step, fixed costs are likely to remain very high.
But on the other hand, investors are cheering the company’s success with its newly redesigned ICE SUV and other vehicles. With a single-digit price-to-earnings ratio, well below domestic rival Ford Motor Co., the stock may have more room to survive as long as GM continues to show profitable progress with its lineup.
Howard Smith has no position in any stocks mentioned. The Motley Fool recommends General Motors and recommends the following options: Long January 2025 $25 Calls on General Motors. The Motley Fool has a disclosure policy.
