Shares of General Motors (NYSE:GM) are down sharply today after the company cut its full-year earnings estimate on concerns about rising commodity costs and exchange rates.
As of 3 p.m. EDT, GM's shares were down about 5.7% from Tuesday's close.
GM reported its second-quarter earnings result on Wednesday morning, and its profit met Wall Street's expectations. But in a surprise move, the company cut its full-year guidance for automotive free cash flow and earnings per share.
GM had previously said that its 2018 earnings per share and adjusted automotive free cash flow would be roughly equal to its 2017 results, $6.62 per share and $5.2 billion respectively. Now it expects to earn about $6 per share and generate adjusted automotive free cash flow of roughly $4 billion -- significant changes.
Why the cuts? CFO Chuck Stevens said that GM is facing two sets of "macro challenges." First, prices for steel and aluminum in the U.S. have risen sharply in recent months, and GM buys about 90% of its steel and 80% of its aluminum here. Second, governments in Argentina and Brazil chose to devalue their currencies, putting a big damper on what had been a good turnaround story for GM in South America.
CEO Mary Barra said that GM will be able to offset those pressures to some extent by hedging and making cuts elsewhere, but she still expects the net impact on 2018 earnings to be roughly $1 billion. That's why GM cut its guidance for the year.
The good news for GM investors is that the company continued to execute well on the things it could control in the second quarter: Sales and pricing remained strong. GM's long-term story remains intact, but there could be further bumps over the next few months if commodity prices remain volatile.