With Deliveries Picking Up, How Will GM Fare In Q3?

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General Motors

General Motors (NYSE:GM) is expected to publish its Q3 2022 results on October 25, reporting on a quarter that saw the company’s delivery performance improve as semiconductor supply issues show signs of easing. We expect revenue to grow by almost 55% year-over-year to around $42 billion in Q3, slightly ahead of the consensus estimates. Earnings are likely to come in at about $1.90 per share, per our estimate, marginally ahead of the consensus of $1.89. See our analysis of General Motors Earnings Preview for a closer look at some of the trends likely to drive GM’s results.

Like most other automotive players, GM has been impacted by a host of factors, including surging inflation and parts shortages.  However, there have been some positive developments of late. GM recently said that its U.S. sales for Q3 2022 rose 24% versus last year to 555,580 vehicles, indicating that semiconductor supply is gradually improving. This compares to a tough Q2 when U.S. deliveries declined 15% year-over-year.  Like most other manufacturers, GM has been prioritizing the production of more expensive vehicles and trucks given the limited supply of components. For instance, the company’s full-size pickup trucks are on track to surpass sales of the Ford F-Series this year. The premium Cadillac brand has seen deliveries grow by 50% versus last year over Q2. This could bode well for GM’s average selling prices and revenues in the near term. Now, GM’s margins have faced some pressure in recent quarters due to inflation. Operating margins stood at 11.8% in Q2 2022, down marginally from about 12.3% in the year-ago period. However, it’s possible that the number will improve a bit in Q3 driven by higher volumes.

While GM stock could trade higher following earnings, we think the stock also remains fundamentally undervalued. At the current market price of about $33 per share, GM trades at just under 5x the mid-point of projected 2022 earnings. The markets also expect that GM’s growth will pick up, with the consensus pointing to about 20% revenue growth in 2022 and about 6% growth in 2023. GM also appears very optimistic about its long-term prospects, noting that it intends to double revenue to between $275 billion and $315 billion by 2030 while expanding margins to between 12% to 14%. We remain bullish on GM stock with a $47 price estimate, which is about 43% ahead of the current market price. See our analysis on General Motors Valuation: Expensive Or Cheap for more details on what’s driving our price estimate for GM. For more information on GM’s business model and revenue trends, check out our dashboard on General Motors Revenue: How GM Makes Money.

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 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GM Return 2% -44% -6%
 S&P 500 Return 0% -25% 60%
 Trefis Multi-Strategy Portfolio -2% -28% 187%

[1] Month-to-date and year-to-date as of 10/17/2022
[2] Cumulative total returns since the end of 2016

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