What happened

Shares of General Motors (NYSE:GM) surged on Friday after the company said that its full-year 2018 earnings would exceed its prior estimates and gave surprisingly upbeat guidance for 2019.

As of 11 a.m. EST, GM shares were trading at $37.62, up 8.3% from Thursday's close. 

So what

In July, GM updated its 2018 full-year guidance. At that time, it expected:

  • Adjusted earnings of about $6.00 per share (2017 result: $6.62).
  • Adjusted automotive free cash flow of about $4 billion, excluding self-driving subsidiary GM Cruise (2017 result: $5.2 billion). 

("Adjusted" figures exclude the impact of one-time items. "Automotive" is GM's term for financial results related to its core automaking business, excluding its financial-services subsidiary.) 

CFO Dhivya Suryadevara maintained that guidance when GM reported third-quarter earnings in October. But she added an optimistic note, saying that GM's full-year adjusted earnings per share might come in above $6.00, thanks to stronger-than-expected operating performance and a favorable tax outlook. 

A 2019 GMC Sierra Denali, an upscale full-size pickup truck.

GM expects its all-new pickups to deliver strong profits in 2019. Image source: General Motors.

So why did GM's stock jump? First, because GM confirmed that optimism on Friday. In a statement released ahead of its annual Capital Markets Day briefing for analysts, it said that it now expects its 2018 adjusted earnings per share and adjusted automotive free cash flow to exceed the guidance Suryadevara gave in October. 

Second, that statement included guidance for 2019 that calls for growth in earnings per share and cash flow. For the full year, GM expects:

  • Adjusted earnings per share between $6.50 and $7.00.
  • Adjusted automotive free cash flow of between $4.5 billion and $6 billion.

Given the pessimistic statements we've heard recently from other automakers, that was a surprise.

Now what

GM will report its fourth-quarter and full-year 2018 earnings before the bell on Wednesday, Feb. 6. We'll know much more about its 2018 performance and expectations for 2019 then. 

Check out the latest GM earnings call transcript.

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