In late October, General Motors (GM 0.08%) stock crashed, even as the auto giant posted a big earnings beat for the third quarter. Investors and analysts appeared to be disappointed with the General's full-year outlook, which implied a significant sequential decline in its profitability in the fourth quarter.

However, anyone who has followed GM closely in recent years knows that the automaker has a habit of issuing conservative forecasts and then beating them. Sure enough, General Motors raised its full-year guidance earlier this week.

Strong profitability despite plunging output

Like its peers in the auto industry, GM has been forced to slash production during 2021 despite strong demand, due to widespread semiconductor shortages. Lower production typically hurts profitability, due to factors like weaker factory utilization and reduced labor productivity.

Nevertheless, General Motors recorded an incredibly strong adjusted operating profit of $11.5 billion in the first nine months of 2021. GM strategically used the bulk of its limited chip supplies to build its most profitable vehicles: mainly full-size trucks and SUVs. Moreover, with the chip shortage leading to short supply across the industry, the automaker radically reduced discounting. High used car prices also drove a surge in profits from the General's financing business.

A subpar Q4 outlook gets better

In conjunction with its Q3 earnings report, GM projected that it would deliver a full-year adjusted operating profit near the high end of its $11.5 billion to $13.5 billion guidance range. That implied that its quarterly adjusted operating profit would step down to around $2 billion in the fourth quarter. Management attributed the decline primarily to near-term cost pressures and an accelerated pace of investments.

At an investor conference this Wednesday, CFO Paul Jacobson said that GM now expects its full-year adjusted operating profit to reach $14 billion. First, the automaker hasn't experienced quite as much cost pressure as it had anticipated. Second, its chip supply has improved relative to expectations, enabling incremental production.

A dark-colored Chevy Silverado driving on a rural road.

Image source: General Motors.

The new full-year forecast implies that GM will log an adjusted operating profit of around $2.5 billion this quarter. That's a solid result considering that the auto giant still faces considerable temporary profit headwinds.

A bright future

Jacobson also told investors on Wednesday that 2022 should be another strong year for GM. Auto demand remains robust, which will help the company to offset cost pressures with higher pricing, particularly given that supply will remain tight throughout the year.

While the semiconductor supply situation remains volatile, General Motors currently expects chip availability to improve steadily over the course of the year. That would enable normal production in 2023, potentially positioning GM for record revenue and earnings in that year from meeting pent-up demand and rebuilding dealer inventories.

Looking further ahead, General Motors has one of the most aggressive roadmaps for electric vehicles (EVs) among traditional automakers. GM expects its annual EV sales to eclipse 1 million by 2025, with rapid growth continuing thereafter. Meanwhile, the company's Cruise subsidiary is just one permit away from becoming the first company to launch a true robotaxi service in California.

In short, GM is on track to report excellent results over the next few years and has a clear runway for long-term revenue and earnings growth. That makes GM stock a steal at its recent valuation of approximately nine times earnings.