Detroit automaker General Motors (GM 1.81%), has shed roughly 35% of its value year to date as the company faced chip shortages, economic uncertainty, and the potential for rising interest rates to hinder consumer demand in the near term.
Despite these headwinds, GM delivered a solid third quarter, and here are three simple charts from its profit-driving North America region that might convince you it's ready to reverse its decline even in the face of uncertainty.
Record revenue
GMNA's Net Revenue and Inventories from Q3 2022 Earnings Deck. Image source: General Motors.
These two charts go hand in hand (consider it a 2-for-1 bonus) and show why GM could be poised to continue improving in the near term. After a year of inventories being crippled from semiconductor chip shortages, the company is finally improving its supply chain/chip shortage and inventories.
The improved supply chain has resulted in higher inventories, which is a positive thing right now, that helped push wholesales 85% higher year over year and resulted in the highest-ever quarterly revenue result of $34.7 billion. Look for that trend to continue into 2023.
Strong bottom-line
GMNA EBIT-ADJ results from Q3 2022 Earnings Deck. Image source: General Motors.
As many investors are painfully aware, a rising top-line doesn't matter as much if the bottom-line is moving in the opposite direction, especially for companies as large and as established as General Motors.
The good news is that GM posted exceptionally strong EBIT-adjusted earnings at a strong 11.2% margin, and it gained 320 basis points of U.S. market share, compared to the prior-year's third quarter.
The future is coming, fast
GM's EV sales. Image source: General Motors Q3 2022 Earnings Deck.
Perhaps the most compelling reason why GM is poised for a turnaround is its readiness for the coming electric vehicle (EV) revolution. In decades past, management's arrogance crippled the company when consumer tastes changed, but that's no longer the case, and GM has long prepared for a swing to EV sales.
General Motors' 2024 Silverado EV RST. Image source: General Motors.
GM posted its best quarterly EV sales result ever, almost doubling its North America market share from the second-quarter mark. Expect this trend to continue as it prepares to launch a number of trucks, SUVs, and luxury EVs over the next couple of years. As the automaker scales its Ultium platform in the near term, it will position the company to grow its volume, efficiency, and EV profitability over time.
Poised for a turnaround?
GM's third quarter was strong in the face of headwinds, and these charts from its North America profit-driving region suggest the company has momentum in key areas to help push its results higher until those headwinds can potentially turn into tailwinds.
The third-quarter result enabled the company to confirm its full-year guidance in the face of challenging economic environments and drove GM's automotive free cash flow a staggering $9 billion higher compared to the prior year.
One quarter doesn't make a trend, but if management continues to improve its supply chain and deliver on high EV expectations, GM is definitely positioned well for a rebound.
Daniel Miller has positions in General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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October 29, 2022 at 04:15PM
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Is General Motors Stock Poised for a Turnaround? 3 Charts That Might Convince You - The Motley Fool
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