General Motors (GM) shares took a sharp downturn on Tuesday morning, plunging nearly 9% during premarket trading, even as the company announced strong earnings for the fourth quarter of 2024 and issued optimistic profit forecasts for the coming years. The decline came after company executives delivered remarks on the conference call, casting doubt over the earlier enthusiasm sparked by the financial results.
For the quarter ending December 31, GM reported impressive figures: revenues increased 11% year over year to reach $47.7 billion, and earnings per share (EPS) soared by 54.8% to $1.92. These results smashed analysts' expectations of $43.6 billion revenue and $1.84 earnings per share, earning commendation from CEO Mary Barra. "We grew full-year revenue 9%, once again we led the U.S. market in total, retail, and fleet deliveries, we grew our market share, and we distanced ourselves from the industry's pricing, incentive, and inventory pressures," she wrote in her Q4 Letter to Shareholders.
Barra emphasized GM's success, saying, "We doubled our electric vehicle market share over the course of the year as we scaled production, and our portfolio became variable profit positive in the fourth quarter." This brings to light the company's strong positioning as they enter 2025 with expectations of earnings between $11 and $12 per share, signaling growth of approximately 3.8% to 13.2% from the previous year's $10.60.
Despite GM’s bullish forecast surprising Wall Street – analysts were predicting earnings of $10.76 per share – concerns over potential tariffs proposed by the Trump administration overshadowed the positive news. These tariffs, if enacted, could impose blanket rates of 25% on imported vehicles from Canada and Mexico, raising significant worries about future profitability and market share.
"Is General Motors' stock still seen as viable after this week’s reports?" asked industry analysts pondering the ramifications. While GM’s stock had performed excellently over the previous year, outperforming the S&P 500 with gains of 58% to the index’s 25%, analysts sounded cautious following the latest update.
S&P Global Market Intelligence noted the average analyst target price for GM stands at $60.01, which implies nearly 20% upside from current stock levels. Despite today's drop, the consensus recommendation remains strong with many experts classifying GM as a buy.
Financial services firm CFRA Research has altered its rating for GM, upgrading it from sell to hold and revising its price target from $45 to $55. Analyst Garrett Nelson highlighted GM's tenth successive earnings beat but voiced skepticism about the company’s future performance due to the anticipated challenges of the 2025 fiscal year, noting, "GM's year-over-year comparisons should be more difficult, and they could lose market share due to the lack of hybrid vehicle offerings.”
Nevertheless, it wasn’t only tariffs affecting GM’s outlook. Nelson also warned of reduced cash flow to approximately $2 billion lower for 2025, mainly due to significant capital expenditures. Despite these headwinds, GM clarified its commitment to potentially lucrative segments, including the introduction of three new Cadillac electric vehicles: the Escalade IQ, Optiq, and Vistiq, aimed at enhancing their electric portfolio.
The quarterly results, flickering with potential, attracted both optimism and skepticism among investors. The automotive market is known for its volatile nature, and GM's stock performance may hinge on broader economic conditions and policy decisions.
Meanwhile, industry observers remain watchful. Will GM’s strong electric vehicle push and solid financial results be enough to counteract potential tariff impacts? Or will uncertainty cloud the company’s prospects this coming year? Investors and analysts hope to gain clarity as the economic backdrop continues to shift, particularly with potential policy changes influencing the automotive sector.
For shareholders, the current situation brings forth the classic question—should they hold tight, or venture elsewhere? Global trade dynamics and domestic policy decisions will surely play out as key factors affecting GM's future performance.