GM Q3 misses on revenue, beats on profit, looks ahead to EVs
18:46, 27 October 2021
General Motors fell short of revenue expectations in its third-quarter earnings report as semiconductor chip shortages continue to weigh on its operations.
The largest US automaker posted revenues of $26.8bn (£19.4bn) in the three months ended 30 September, which was down from $35.5bn during the same period last year and short of analyst expectations of $27.9bn, according to a report from Jefferies obtained by Capital.com. Likewise, diluted and adjusted earnings per share fell to $1.52 from $2.83 last year, but did beat the analyst consensus of 99 cents.
Shares fell by more than 4% following the report to around $54.80 per share. Yet, GM shares are still up more than 35% on the year on optimism for its electric vehicle strategy.
Supply chain issues
The Detroit-based company reported negative $4.4bn of adjusted automotive free cash during the quarter, due to vehicles that are largely complete but sit idle waiting for semiconductor components or other materials that are backlogged because of the global supply chain disruptions.
Jefferies automotive analyst Philippe Houchois said those free cash flows are likely to reverse in the fourth quarter as GM moves those vehicles off the production line. Indeed, GM’s chief financial officer Paul Jacobson guided for a reversal by next quarter.
GM is still expecting to reach the high-end of its adjusted EBIT full-year guidance of $11.5bn–$13.5bn, which itself was revised up in the second quarter from $10bn–$11bn.
Adjusted EBIT was $2.9bn for the quarter and $11.5bn for the nine months year to date.
“While chip shortages were clearly an issue in the quarter (to no surprise of anyone) and limited supply/production, we believe moderation of these headwinds will start to manifest for GM and the rest of the auto industry into 2022,” Wedbush automotive analyst Daniel Ives wrote in a report on Wednesday reviewed by Capital.com.
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The EV future
CEO Mary Barra said during the earnings call that her “clear focus is on transforming GM,” which includes the introduction of 30 new electric vehicle models by 2025.
GM already has sales of its Chevy Bolt EV model and the company plans to ship its luxury Cadillac Lyriq late next year. The company is also planning launches for its GMC Hummer EV pickup and SUV and the new electric Chevy Silverado and GMC Sierra pickups.
Barra was bullish in an interview on CNBC following the earnings call in which she said GM could catch Tesla in EV sales by 2025. GM has a long way to go as the company delivered 4,515 Bolt EVs across the US in the third quarter while Tesla delivered 241,000 electric vehicles worldwide (GM does not operate in Europe nor does it breakout EV sales in China).
“With Barra & Co. developing game-changing battery technology under the Ultium Platform, GM is in a great position to take advantage of a $5trn market emerging over the next decade,” Ives wrote. “By leveraging this technology, the legacy auto will be able to eat up market share against pure-play EVs in all aspects of the industry, although Tesla will continue its iron-clad grip at the top of the EV pecking order.”
Read more: GM seeks to double revenue with new EVs, software
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