GM Delivers Earnings Beats Despite Chip Shortage Setbacks

GM Delivers Earnings Beats Despite Chip Shortage Setbacks

Factory closures and a worldwide semiconductor shortage weren't enough to hold back GM (NYSE:GM) as it turned in first-quarter results earlier today that shattered Wall Street expectations. GM looks for the successes of the first quarter to carry on through to at least the second quarter as it brought out the numbers.

Wins on Nearly Every Front

GM brought out earnings per share figures of $2.25 against Refinitiv expectations of $1.04 per share. However, revenue didn't fare so well, coming in a $32.47 billion against Refinitiv's $32.67 billion projected. GM faced downward pressure going into trading yesterday ahead of the financial results announcements, but gained over 4% in pre-market trading as the numbers emerged.

Unadjusted revenue compares well to this time last year, however; GM brought in $3 billion in net income unadjusted, reports note, against $294 million at the same time last year as GM shut down several factories as required by government mandates in the face of Covid-19 outbreaks.

Earnings guidance for the year remains as previously stated, as GM reaffirmed the figures. Current forecasts call for annual earnings to fall between $10 billion and $11 billion, with a per-share figure between $4.50 and $5.25 per share on an adjusted basis before taxes. Free cash flow connected to automotive operations is set to be between $1 billion and $2 billion for the full year.

GM attributed the gains to a combination of strong pricing for current automobile sales, as well as excellent performance for GM Financial, its credit arm. This is despite an ongoing shortage in global semiconductor sales that was sufficiently pronounced to require some factories to be shut down. GM CFO Paul Jacobson notes he is “increasing(ly) confident” that the company would ultimately meet its previously-stated full-year earnings targets based on the results seen so far. Meanwhile, CEO Mary Barra offered a letter to shareholders citing the “speed and agility” of its current team, as well as its ability to effectively “manage complex situations” despite the troubles presented by the semiconductor shortage.

Financial Analysts Increasingly Bullish

Financial analysts have been bullish on GM for the last two years now, as based on our latest research, but the pattern appears to be only trending upward to the bullish. A year ago, GM stood at 10 “buy” ratings, two “hold” and two “sell.” Six months later, that improved to 14 “buy” ratings along with one “hold” and two “sell.” Today, it stands at 17 “buy” ratings, one “hold” and one “sell.”

Price targets, meanwhile, demonstrate a broad range. The average currently stands at $60.42, with a high of $85 and a low of $34. However, the movement for 2021 has been overwhelmingly positive. Of the 10 analysts that have filed positions on GM for 2021, eight have raised their price targets. Argus, one of the two that did not, instead raised its position from “hold” to “buy”. The other, Wells Fargo, only initiated coverage on GM back on April 5, where it led off with an “overweight” recommendation and a price target of $67. Wells Fargo, via analyst Colin Langan, praised GM's increasing initiatives in electric vehicle manufacture when issuing his statement.

The high target came from Citigroup, who issued it February 25 in a raise from the previous target of $70. The low target, meanwhile, of $34 can be traced back to UBS Group, who issued it nearly a year prior on July 1 of 2020.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
General Motors (GM)$58.76flatN/A9.51Buy$63.90