Shares of legacy automaker General Motors (GM 1.12%) came to life on Wednesday after the company announced a very quick $10 billion share repurchase program and updated guidance. The market hasn't loved GM stock and management seems to be taking matters into its own hands, simply buying back a huge percentage of the company.
GM's huge buyback
The highlight number is a $10 billion buyback that GM expects to complete before the end of the year. But the bigger news is a $6.8 billion purchase that will be made by the end of the week. This is one of the most aggressive buyback plans I've ever seen and could buy back about 17% of the company by the end of the week.
NYSE: GM
Key Data Points
On top of the buyback, GM gave guidance for the full year after pulling it during the UAW strike. For 2023, management expects $9.1 billion to $9.7 billion in net income, adjusted automotive free cash flow of $10.5 billion to $11.5 billion, and earnings per share after buybacks of $7.20 to $7.70. These figures are down slightly from before the strike, but indicate that GM will be extremely profitable this year.
General Motors betting on itself
Given the fact that GM stock is trading for less than 5 times 2023 earnings, the market isn't pricing in a very good future for the company. So, management is taking matters into its own hands by buying back as much as 25% of the company by the end of the year. I think this is a great use of capital given the consistent cash flows from trucks and SUVs right now and this could be a top performing auto stock over the next few years.
