General Motors stock fell nearly 3% in premarket trading Wednesday. Options markets imply GM stock will move about 5%, up or down, Wednesday.
Bill Pugliano/Getty ImagesStock in automotive giant General Motors rose in premarket trading immediately after the company reported third-quarter earnings that beat the Street.
But shares have given up gains because fourth-quarter numbers, implied by GM’s updated full-year guidance, look conservative. It’s a repeat of the second-quarter earnings print.
GM (ticker: GM) shares started out with a 3% gain shortly after results were published. Shares are down about 1.1% as of 8:22 a.m. eastern time. S&P 500 futures are down about 0.1%, while Dow Jones Industrial Average futures were little changed.
GM reported $1.52 in per-share earnings and $2.9 billion in operating profit from $26.8 billion in sales. Wall Street was looking for about 98 cents in per-share earnings and $2.1 billion in operating profit from $30.7 billion in sales.
Sales came in light, but that isn’t a big surprise. The global semiconductor shortage is still constraining car production. But low inventories—due to a lack of production—are pushing up pricing and per-car profitability.
U.S. dealer inventories of GM vehicles sat at about 129,000 units at the end of Q3. That’s down from about 492,000 vehicles a year ago.
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Looking ahead, GM raised full-year per-share earnings guidance to a midpoint of $6.20 from $5.90. The 30 cent raise, however, is less than the size of the third-quarter earnings “beat.”
GM left the midpoint of operating profit guidance unchanged at $12.5 billion. The range remains $11.5 billion to $13.5 billion. The midpoint new guidance implies $1.1 billion in fourth-quarter operating profit, well below Wall Street’s is projecting $2.3 billion. Although management did say earnings are trending toward the high end of the range, which could mean Q4 operating profits tally about $2.1 billion. That’s still a little light—and why shares are weak.
That guidance dynamic is a repeat of the second-quarter report when investors sent GM stock lower. Investors reacted positively this time, but conservative guidance might keep a lid on shares as Wednesday trading develops.
GM stock is down about 1% since just before second-quarter earnings were reported in early August. That’s despite a 9% drop the day earnings were reported on August 4. Ford Motor (F) stock is up about 14% over the same span.
Coming into Wednesday, shares were up about 38% year to date.
Management hosts a conference call at 10 a.m. eastern time to discuss results. Production and operating profits will be big topics of discussion. Investors will want to know when there will be enough microchips to return auto production to normal.
Write to Al Root at allen.root@dowjones.com
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October 27, 2021 at 07:52PM
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General Motors (GM) Stock Is Dropping Despite Great Earnings - Barron's
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