General Motors reported earnings per share on Wednesday (EPS) for the third quarter, significantly exceeding analysts' forecasts, overcoming severe supply constraints.
General Motors vs. Tesla
The company also raised its full-year earnings per share forecast and said, what expects to report adjusted operating income for the year, close to the upper limit of its forecast range.
Tesla is constantly updating its electric vehicle models Tesla is constantly updating its electric vehicle models
However, investors were not impressed.. GM shares fell more than 5% Wednesday and retreated to 15% from the all-time high, achieved earlier this year. The recent pullback presents a great buying opportunity for long-term investors.
General Motors coped very well with the global semiconductor shortage in the first half 2021 of the year. Nevertheless, deficit, finally, caught up with him last quarter.
In key North American market, wholesale car sales fell by 47% on an annualized basis to about 423 000 units solely due to supply restrictions.
GM also suffered smaller production losses in other regions..
Report, which inspires hope
Despite a sharp decline in income, last quarter GM recorded an adjusted operating income of 2,9 billion dollars.
- This is significantly less than the automaker's adjusted operating profit of 5,3 billion dollars for the previous year, but roughly matches its third-quarter earnings 2019 year and third quarter 2018 of the year.
Net profit in the amount of 700 million dollars from recent settlement with battery supplier LG to cover recall costs contributed to stable operating profit, as well as profit before tax from a financial subsidiary of GM in the amount of 1,1 billion dollars.
Looking to the future, GM now expects, that its adjusted operating profit by 2021 year will approach the upper limit of the forecast range from 11,5 to 13,5 billion dollars.
Thanks to the lower expected tax rate, the company also raised its adjusted EPS forecast by 0,30 dollar to a new range from 5,70 to 6,70 dollar.
General Motors' production is set to increase significantly next year from 2021 year. However, the continued shortage of chips means, which may take a year or more, to bring production back to peak levels.
Even with production recovery, GM must maintain a strong pricing policy due to deferred demand, associated with the current shortage of cars.
- The automaker will also have to rebuild its U.S. dealership inventories., which by the end of September fell to about 129 000 cars: compared to 492 000 a year earlier.
New directions of business, such as robotaxi, auto insurance, connected services and electric vans, will stimulate this growth.
Despite such a favorable prognosis, GM shares are trading at eight times the profit. This makes it one of the best deals in the stock market today..