Please ensure Javascript is enabled for purposes of website accessibility

General Motors Earnings: What to Expect

By John Rosevear - Updated Feb 9, 2021 at 8:43AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

GM reports on Wednesday morning. Here's a preview.

General Motors (GM -5.96%) will report its fourth-quarter and full-year 2020 earnings before the market opens tomorrow, Feb. 10. What should we expect?

What Wall Street expects

Wall Street analysts polled by Thomson Reuters expect GM to report adjusted earnings per share of $1.63 on revenue of $36.12 billion, on average. ("Adjusted" earnings exclude one-time items.) 

Both would be substantial improvements over GM's results in the fourth quarter of 2019, which began amid a strike that idled its plants in the United States. GM earned just $0.05 per share on revenue of $30.8 billion in that year-ago period. 

How GM performed in the fourth quarter of 2020

  • GM's U.S. sales were very strong in the fourth quarter, up 5% from a year ago despite weak commercial fleet sales. Put another way, GM's higher-margin retail sales were very strong. A key factor: Sales of GM's new full-size pickups were up 11%, as GM's dealers took advantage of rival Ford Motor Company's tight pickup inventories amid a changeover to an all-new 2021 F-150. 
  • Also helping: U.S. sales of GM's brand-new big SUVs -- the Chevrolet Tahoe, Chevrolet Suburban, and GMC Yukon -- were up a combined 28% year over year. 
  • GM also did well in China: Sales rose 14.1% in the fourth quarter from a year ago, driven by strong sales of new SUVs at Cadillac (up 56%) and Buick (up 28%). 

The takeaway for investors: This was a very good quarter for GM in its two most important markets.

A black 2021 GMC Sierra Denali, an upscale full-size pickup truck.

Sales of GM's new full-size pickups, the Chevrolet Silverado and GMC Sierra, were up a combined 11% from a year ago on strong retail demand. Image source: General Motors.

What GM told us to expect

GM didn't give us explicit guidance for the fourth quarter. But during GM's third-quarter earnings call, acting CFO John Stapleton said investors should expect the company's second-half adjusted earnings before interest and taxes ("EBIT-adjusted," in GM-speak) to fall between $8.5 billion and $9.5 billion, with adjusted automotive free cash flow between $11.5 billion and $12.5 billion. Stapleton also warned investors to expect GM's fourth-quarter result to come in below its third-quarter result, as additional costs related to new-product launches would weigh. 

We know that GM reported EBIT-adjusted of $5.3 billion in the third quarter, with adjusted automotive free cash flow of $9.1 billion. Translation: GM guided investors to expect EBIT-adjusted of between $3.2 billion and $4.2 billion in the fourth quarter, with adjusted automotive free cash flow between $2.4 and $3.4 billion. (More GM-speak: "Automotive" results exclude results from GM's financial-services subsidiary.) 

We can't translate that EBIT-adjusted range to adjusted earnings per share with great precision. But we can apply a back-of-envelope estimate: Call it $1.60 to $2.10, give or take. 

What to expect when GM reports earnings

I think there are some good reasons for auto investors to expect GM to beat Wall Street's earnings-per-share estimate of $1.63, which seems a bit conservative given GM's strong sales results (and particularly strong sales of higher-profit products) in the U.S. and China in the quarter.

Yes, some costs will weigh -- GM is preparing to launch a slew of new electric vehicles, after all. But I think the stage is set for a nice upside earnings surprise when GM reports on Wednesday morning.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$35.83 (-5.96%) $-2.27
Ford Motor Company Stock Quote
Ford Motor Company
F
$12.78 (-5.54%) $0.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.