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Why General Motors Stock Is Rising Today

By John Rosevear – Jun 5, 2020 at 2:46PM

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If the economy really is recovering, GM could come out of this in very good shape.

What happened

Shares of General Motors (GM -1.24%) were moving higher on Friday, on new signs that the economy might be recovering from coronavirus-induced disruptions more quickly than had been expected. 

As of 2:15 p.m. EDT, GM's shares were up about 3.9% from Thursday's closing price. 

So what

The U.S. Bureau of Labor Statistics reported on Friday morning that total non-farm employment rose by 2.5 million jobs in May, driving the unemployment rate down to 13.3% from 14.7% in April. 

Both figures were significantly better than expected and added to the growing number of data points suggesting that the pandemic-induced economic disruption might have bottomed in April. 

Chevrolet Silverado pickups on the production line at GM's factory in Flint, Michigan.

GM has three U.S. factories that build pickups. All three returned to round-the-clock operation earlier this week. Image source: General Motors.

Clearly, that's good news for automakers, including GM. GM was on a roll before the outbreak of the COVID-19 virus in the U.S., with sales of its new pickup trucks driving strong profit margins. With its factories now restarted and economic pressure -- perhaps -- easing a bit, auto investors who are willing to look several months out have a growing number of reasons to be cautiously excited about GM's potential profit recovery.

Now what

That thinking was echoed in a note from widely followed Morgan Stanley analyst Adam Jonas on Thursday. Jonas said that while he is still expecting GM to post an operating loss of $2.2 billion for the second quarter, "it's possible" that GM could end up breaking even.

Jonas sometimes seems a little out in front of reality, but I'm not sure this is one of those times. May U.S. auto sales figures suggested that consumer demand is recovering, and that trend appears to be continuing into June. With GM now running its truck factories around the clock, it might end the quarter not too far from where it was before the virus outbreak. If so, it could emerge from this crisis in a very strong position. 

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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