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General Motors posts big third-quarter earnings beat but holds full-year guidance steady amid ‘headwinds’

DETROIT – General Motors easily beat Wall Street’s earnings expectations during the third quarter, while signaling caution and confirming its full-year results are likely to come in near the “mid-point” of its previously announced forecast.

The Detroit automaker on Tuesday stressed that demand for its products remains strong despite outside economic concerns and rising interest rates. But its profits narrowed in the third quarter, as its vehicle inventory slowly rises from record lows.

Here’s how GM performed, compared with analysts estimates as compiled by Refinitiv:

  • Adjusted earnings per share: $2.25 vs. $1.88
  • Revenue: $41.89 billion vs. $42.22 billion

The big beat and narrow miss on the top line has been a trend throughout the coronavirus pandemic for the automaker, as tight supplies of vehicles have led to lower sales but higher profits on in-demand SUVs and pickup trucks.

Despite the bottom-line beat, GM did not adjust its guidance for the year as profit margins narrowed. The company expects full-year net income of between $9.6 billion and $11.2 billion and adjusted earnings before interest and taxes of between $13 billion and $15 billion, or $6.50 and $7.50 per share.

GM CFO Paul Jacobson said the company expects to hit the “mid-point” of its earnings guidance for the year. He said the automaker is not ignoring outside economic concerns but has not seen “any direct impact” on its products.

“We’re going to continue to be agile,” he told reporters during a media call. “We continue to see that strong demand.”

His comments echoed those of GM CEO Mary Barra in a letter to shareholders Tuesday. She said the company reaffirmed its guidance “despite a challenging environment because demand continues to be strong for GM products and we are actively managing the headwinds we face.”

Shares of the automaker gained about 2.5% in early trading following the company’s quarterly report.

Most investors were expected to look past the Detroit automaker’s results in favor of any change in guidance or comments regarding larger economic issues. Inflation in particular has already dominated the conversation on Wall Street at the start to earnings season.

The auto industry’s earnings and forecasts are being closely watched by investors for any signs that consumer demand could be weakening amid rising interest rates and looming recession fears.

Jacobson said the automaker has completed about 75% of the 95,000 vehicles in its inventory that were manufactured without certain components as of June 30. GM said it expects that “substantially all of these vehicles” will be completed and sold to dealers before the end of 2022.

For the third quarter, GM reported adjusted net income of $4.3 billion, up from $2.9 billion a year earlier. Its adjusted profit margin for the quarter narrowed to 10.2% compared with 10.7% during the third quarter of 2021.

On an unadjusted basis, net income was $3.3 billion, up $885 million from a year earlier. The company’s earnings powerhouse, as it has been, was North America with adjusted earnings of $3.9 billion, up from $2.1 billion a year earlier. Earnings also increased $60 million in China compared with the third quarter of 2021, while the company’s financial arm saw its earnings drop to $911 million, down $182 million from a year earlier.

Jacobson brushed off any concerns about slowing growth and pricing concerns in China, the world’s largest vehicle market. He described it as an “important market” but not “decisive” to its financial performance, despite being GM’s top sales market.

GM Financial’s lower earnings follow strong results throughout the coronavirus pandemic, as consumers, up until recently, easily financed vehicles amid low interest rates and record-high prices.

Jacobson said the company has expected GM Financial’s earnings to decline from their record highs but said the business is expected to continue to perform well.

“We still see a lot of goodness out of GM Financial, and the team has done a great job, positioning their credit portfolio to weather any storm that we might see,” he said.

Cruise, GM’s majority-owned autonomous vehicle subsidiary, has lost $1.4 billion through September, including $500 million in the third quarter. The company started offering fared rides in self-driving vehicles earlier this year.

GM on Tuesday also announced it will host an investor day webcast on Nov. 17.