GM's Q3 Earnings Were Great — But This Risk Hangs Over Surging Stock
General Motors (GM) reported smaller-than-expected declines in third-quarter earnings and revenue, sending shares higher early Tuesday.
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Estimates: EPS to dive 38% to $1.07 as revenue shrinks 27% to $31.6 billion, according to Zacks Investment Research, amid a U.S. demand slowdown, a hefty planned reduction in fleet sales, as well as a retreat from certain European, African and Asian markets.
Results: EPS of $1.32 on revenue of $33.6 billion. Free cash flow was -$1 billion, worse than expected.
Outlook: GM sees full-year EPS of $6-$6.50 vs. the consensus for $3.14.
Stock: Shares climbed 2.75% in premarket trading on the stock market today, having advanced 23% from their September breakout off a 36.73 buy point as of Monday's close. Fiat Chrsyler (FCAU), which also reports Tuesday, advanced 3.3%, and Ford Motor (F), which reports on Thursday, climbed 1.2%. Tesla (TSLA) inched up 0.5%. Tesla's Model 3 production woes are seen as giving GM and other automakers an opening in expanding their electric vehicle lineup.
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The rally in GM stock this year has come despite signs of a slowdown in U.S. car sales after seven years of record growth.
GM is instead focusing on more profitable SUVs, trucks and crossover, while aggressively pursuing nascent technologies and emerging trends that are expected to shape the auto industry of tomorrow.
GM has grand ambitions for an all-electric future and recently announced plans to launch 20 new electric and low-emission vehicles by 2023.
Its electrification strategy is being driven by a push in major automotive markets, both developed and developing, to eventually ban the sales of cars powered by traditional gas or diesel engines. China's attempts to gain leadership in the electric vehicle market has lent urgency to GM's EV push, though the company is wary of gas-car bans and EV mandates.
GM also is testing well over 100 self-driving cars in Arizona, California, Michigan — and possibly lower Manhattan soon, while investing in ride-sharing service Lyft and expanding its Maven car-sharing brand as automakers look to a future of on-demand mobility.