Nora Eckert
DETROIT (Reuters) – General Motors (NYSE:) beat Wall Street expectations again this year as third-quarter results benefited from steady demand for gasoline-powered trucks and SUVs as well as tight inventories.
GM aims to achieve full-year earnings at the high end of its earlier forecast, and Chief Financial Officer Paul Jacobson allayed customer concerns about the economy.
“The consumer has done exceptionally well for us,” he told reporters, while predicting stronger demand next year thanks to interest rate cuts.
GM started the year expecting to post a pretax profit of $12 billion to $14 billion and raised that forecast to $13 billion to $15 billion midway through the year, buoyed by forceful prices and consumer spending.
On Tuesday, the company said it was on track to post pretax profits of $14 billion to $15 billion. Its shares rose by approximately 0.7% in pre-market trading.
GM’s adjusted earnings per share of $2.96 for the quarter topped market expectations of $2.43, and revenue of $48.8 billion topped estimates of $44.6 billion.
CEO Mary Barra focused on stability, saying earlier this month that GM’s earnings next year would be similar to this year’s, a relief to investors who had worried about a potential decline in auto industry profits.
GM said prices could be lower next year, but expects the results to be supported by cost cuts for SUVs and electric vehicles and an improving situation in China.
The frail spot in otherwise forceful earnings was China, where it posted a first-half loss of $210 million. GM lost another $137 million in the region in the third quarter and plans to restructure its operations in the region.
“We haven’t really started any real restructuring yet,” Jacobson said, adding that sales in the region are rising and inventories are falling.
Investors fear that high interest rates and economic concerns will catch up with consumers and depress modern car sales, despite the resilience seen for most of the year.
Shareholders are also concerned about automakers’ losses on electric vehicles as Chinese rivals launch low-cost electric vehicles abroad and Tesla (NASDAQ:) continues to dominate sales of battery-powered vehicles in the U.S.
CFRA Research analyst Garrett Nelson said GM could lose market share in the near future due to the lack of hybrid vehicles, and free cash flow would be hampered by capital spending to switch to electric vehicles.
For the quarter ended Sept. 30, the Detroit automaker’s total capital expenditures were about $2.3 billion, compared with about $2.53 billion a year ago.
Wedbush analyst Dan Ives called GM’s forecast update a “big step in the right direction” as the automaker navigates an uncertain market.
While Chinese automakers have not yet entered the U.S. market, gigantic automakers such as GM recognize the threat from low-cost, high-tech vehicles, executives say.
GM shares are up 36% this year, outpacing rivals Stellantis (NYSE:) and Ford Motor (NYSE:)), whose stock prices have fallen over the same period.
Ford struggled with costly quality problems, and Stellantis saw sales and revenue decline in North America after it raised prices and stopped incentives.
INVESTORS LOOKING FOR CLARITY ABOUT AUTONOMOUS CRUISE
GM’s profit engine, established gas-powered vehicles, including eight refreshed gas SUV models by the end of 2025, are attracting many customers who aren’t yet ready for electric vehicles.
Electric vehicle sales have increased quarterly this year as production ramps up models including the Silverado EV truck and the Equinox electric SUV.
Still, electric vehicles accounted for only about 4% of GM’s total U.S. deliveries in the third quarter.
Investors are looking for more transparency about GM’s Cruise autonomous unit, which has been under scrutiny since one of its robotoxies carried a pedestrian last year.
The unit posted an operating loss of $400 million for the quarter, down from $700 million a year earlier. Earlier this month at a GM investor meeting, Barra said the division would lose more than $2 billion in 2025.
