General Motors (GM) is cruising into 2024 after a stellar first quarter that surpassed analyst expectations. The Detroit-based automaker reported strong financial performance, particularly in North America, prompting the company to raise its 2024 earnings guidance.
Revenue and Earnings Top Forecasts: GM reported adjusted earnings per share of $2.62, exceeding the consensus estimate of $2.15. This represents a significant 22% increase year-over-year. Revenue also topped expectations at $43.01 billion, marking a 7.6% increase from the $40 billion reported in the same period last year. The company's net income rose by approximately 26% to $2.95 billion during the quarter.
Adjusted Earnings Guidance Raised: As a result of the strong performance, GM has revised its adjusted earnings forecast upwards. The company now expects adjusted earnings to fall between $12.5 billion and $14.5 billion, or $9 to $10 per share. This is an increase from the earlier projection of $12 billion to $14 billion, or $8.50 to $9.50 per share. The upward revision reflects GM's confidence in its ability to sustain its momentum throughout the year.
While North America fueled GM's success, the company faced headwinds in other markets.
Robust Truck Sales Drive North American Growth: A major contributor to the financial uplift was GM's North American operations, particularly robust truck sales. This region alone achieved a 7.4% increase in adjusted earnings to $3.84 billion, surpassing previous year's figures. GM also reported a higher-than-anticipated adjusted profit margin of 10.6% in North America, above the projected range of 8% to 10%. Paul Jacobson, CFO of GM, highlighted the steady vehicle pricing and a surge in retail sales as key drivers behind these strong results. He noted that despite a slight variation in vehicle mix, price levels remained stable, contradicting the anticipated 2% to 2.5% decline for the year. Jacobson remarked on the resilience of GM's consumer base amid rising interest rates, expressing confidence in the company's ongoing performance in the North American market.
Challenges in China, Commitment Remains: Internationally, GM faced challenges, particularly in China where the company incurred losses of $106 million. Additionally, other international markets also contributed to a minor loss of $10 million. Despite these setbacks, GM CEO Mary Barra reaffirmed the company's commitment to China, countering speculations about a potential market exit prompted by declining earnings and increased competition in the region. Jacobson also mentioned that the losses in China were slightly less severe than anticipated, offering a glimmer of hope for future performance.
Looking ahead, GM remains focused on innovation and market expansion, with electric vehicles (EVs) and autonomous vehicles taking center stage.
EV Production Ramp-Up Planned: The company is optimistic about its highly profitable pickup trucks and the ongoing scale-up of its EV production. Despite past bottlenecks in battery module production, GM is confident in its ability to meet its target of manufacturing between 200,000 and 300,000 EVs in 2024. This aggressive production ramp-up reflects GM's commitment to capturing a significant share of the growing EV market.
Investment in Cruise Continues: GM's Cruise autonomous vehicle unit remains a focal point of investment, with an expected expenditure of $1.7 billion this year. This continued investment follows a pause in operations due to an incident in October involving a pedestrian. Barra indicated that GM is considering various funding options for Cruise, including potential external investments. Continued investment in Cruise signifies GM's long-term vision for autonomous vehicles and its determination to be a leader in this transformative technology.
Vehicle Inventory Levels on the Rise: While GM is optimistic about future sales, there is a cause for short-term caution. Vehicle inventory levels in the U.S. are on the rise, with the company closing the first quarter with a 63 days' supply, higher than the targeted range of 50 to 60 days. However, Jacobson assured that the company is not overly concerned, anticipating a strong sales season ahead. Effective inventory management will be crucial for GM to maintain profitability in the coming months.
GM's positive start to the year sets a hopeful tone for the remainder of 2024. With strong domestic sales, a strategic focus on EVs and autonomous vehicles, and a commitment to navigating international challenges.
