GM Earnings: Strong Start to 2024 Is Good Sign for Rest of the Year
GM’s adjusted automotive free cash flow set a first-quarter record; its stock remains undervalued.
Key Morningstar Metrics for General Motors
- Fair Value Estimate: $84.00
- Morningstar Rating: 5 stars
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
What We Thought of General Motors’ Earnings
General Motors GM started the year with good results and raised its 2024 guidance for earnings per share and adjusted EBIT, giving us no reason to change our fair value estimate of $84 per share. Adjusted diluted EPS of $2.62 rose 18.6% year over year (9.8% excluding buybacks) and beat the LSEG consensus of $2.15. EPS is now guided at $9.00-$10.00, up from $8.50-$9.50. Good demand expectations, cost-cutting efforts, and the fact that pricing didn’t fall as much as planned in the quarter led to a $500 million increase on both ends of adjusted EBIT guidance to $12.5 billion-$14.5 billion.
We’ve never believed the chip shortage inducing falling prices would mean poor 2024 results because we expected benefits from higher US volumes as the industry heals from the shortage. Total adjusted EBIT rose 1.8% year over year as a $200 million pricing headwind and $500 million mix headwind on fewer trucks and more electric vehicles were offset by a $700 million volume tailwind.
GM North America’s $900 million volume benefit offset $200 million in lower GM International volume. GM’s ongoing $2 billion cost reduction plan for 2024 contributed $200 million and helped offset higher labor costs in the new United Auto Workers union contract.
Despite modest EBIT growth, GM’s adjusted automotive free cash flow of $1.1 billion was a first-quarter record thanks to fewer working capital outflows. GM ended the quarter with $33.3 billion of automotive liquidity, including $13.5 billion in cash and bonds. Share repurchases beyond the accelerated share repurchase continued at $280 million and $800 million of authorization outside the ASR remains.
GM North America’s EBIT rose 7.4% to $3.8 billion, with the margin at a healthy 10.6% (down 30 basis points), but GMI lost $10 million and GM China had a negative equity income of $106 million. China and South America saw intentionally lower production to avoid excessive discounting to clear inventory, but China should be profitable in the second quarter.
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