Why GM Earnings Don't Look Too Bad

When General Motors Co. (NYSE: GM) reported second-quarter results before markets opened Wednesday, the automaker posted an adjusted diluted per-share loss of $0.50 on revenues of $16.8 billion. In the same period a year ago, the company reported earnings per share (EPS) of $1.64 on revenues of $36.1 billion. Second-quarter results also compare to the consensus estimates for a loss per share of $1.77 and $17.3 billion in revenues.

GM’s net loss for the quarter totaled $806 million, down from a profit of $2.4 billion in the year-ago quarter. The adjusted pretax (EBIT) loss totaled $709 million, down from $2.4 billion in the year-ago quarter.

GM said that the financial impact of the COVID-19 pandemic had a significant impact on quarterly results. North American sales dropped 62% and EBIT in the region declined by $200 million. Sales in China rose by $200 million year over year in the quarter, and the company received a dividend payment of $500 million from its Chinese operations.

Free cash flow came in at a negative $9 billion, down $11.6 billion year over year. Total automotive liquidity at the end of the second quarter was $30.6 billion.

U.S. sales volume declined by about 34% year over year, again due to the pandemic and to inventory constraints following plant shutdowns.

CEO Mary Barra commented that GM will “continue to drive the necessary change throughout the company to enable growth as we prepare to deliver a world with zero crashes, zero emissions and zero congestion.”

The company did not provide guidance, but analysts are estimating third-quarter EPS of $1.06 and revenue of $32.42 billion. For the full year, analysts are looking for EPS of $1.18 and sales of $117.2 billion.

GM noted that sales declines moderated in May and June to around 20% year over year, following a decline of 35% in April. The company has nearly returned production to pre-pandemic levels and plans to increase production at its Fort Wayne plant by about 1,000 full-size pickups a month beginning September 1. The company has cut its costs by $3.8 billion over the past two years and expects another $200 million in the second quarter.

GM shares traded down about 0.4% at $26.81 early Wednesday morning, within a 52-week range of $14.33 to $41.90. The 12-month consensus price target on the stock is $37.47.