General Motors (GM +4.11%) reported its first-quarter results on Tuesday morning, and they were good. Its net income of $3 billion, or $2.62 per share on an adjusted basis, and revenue of $43 billion both handily beat Wall Street estimates as reported by Refinitiv. The Detroit giant also raised its full-year guidance.
You might have seen all of that in Tuesday's headlines, but here are three deeper takeaways from GM's earnings report for investors holding -- or considering -- GM stock.
GM's Ultium electric-vehicle (EV) program is back on track after a series of setbacks. Next up: The Chevrolet Equinox EV, arriving this quarter with 319 miles of range and a starting price of $35,000. Image source: General Motors.
GM's sales and pricing are holding up well, despite higher interest rates
GM is a global business, but the U.S. market is its most important profit driver. The first quarter was good for the company at home as its U.S. retail sales grew 6% from a year ago.
That wasn't a huge year-over-year gain, but it's impressive because GM was able to do it without huge price cuts and with incentives that were below the industry's average. That meant strong profit margins. GM's earnings before interest and taxes (EBIT)-adjusted margin -- essentially operating profit minus one-time items -- was a strong 9% globally and 10.6% in North America.
More to the point, GM's guidance had anticipated prices falling by 2% to 2.5% in 2024 due to interest-rate pain for customers and strong supplies of new vehicles. But as CFO Paul Jacobson noted during GM's earnings call, its pricing so far is trending better than expected.
"For Q1, pricing was down only about $200 million year over year, driven by demand for our products and a disciplined go-to-market strategy that prioritizes profitability and margins," Jacobson said. "And so far, in April, we've seen pricing remain relatively consistent."
While GM's average transaction prices are down, Jacobson attributed that to the success of the revamped small Chevrolet Trax and new Buick Envista crossovers, not to increased discounts on GM's high-margin pickups and big SUVs. Put another way, the company isn't wildly discounting the bigger, high-priced models -- it's selling more of the smaller ones. (Sales of the revamped Trax were up 481% in the first quarter from a year ago, while ales of the Envista were up 224% over those of its predecessor, the Buick Encore, in the first quarter of 2023.)
Jacobson also reminded investors that the newly upgraded Trax and the new Envista aren't just more competitive than their predecessors -- they're also more profitable for GM. That, plus the resilience of GM's pricing on its more expensive products, is good news for investors in the near term.
GM overhauled the little Chevrolet Trax and sales were way up in the first quarter. It's more profitable than the old one, too. Image source: General Motors.
GM's EV rollout seems to be back on track
GM's planned 2023 rollout of new "Ultium" electric vehicles (EVs) hit a big snag: Manufacturing equipment from a particular supplier wasn't up to snuff, and months of delays followed. When added to significant software issues that led GM to halt sales of its Chevrolet Blazer EV, some analysts wrote down GM's whole EV effort.
Fortunately for the company's investors, news of Ultium's death now appears to have been wildly premature. GM said that the much-anticipated low-cost Chevrolet Equinox EV is on track to begin arriving in U.S. showrooms before the end of June. Meanwhile, the larger Chevy Blazer EV's software has been de-glitched and is on sale again -- with a significant price cut. And more affordable versions of the electric Blazer and Silverado pickup will arrive later in 2024, CEO Mary Barra said.
Ultium is still in its early days. Much will depend on how well these new EVs compete and perform over time in the real world. But for now, at least, it appears that GM's huge bet-the-company migration to battery-electric technology is back on track. That's excellent news for GM's longer-term profit prospects.
NYSE: GM
Key Data Points
GM boosted its guidance despite last year's rich UAW contract
If you read the coverage of GM's earnings report on Tuesday, you probably noticed that the company raised its full-year guidance. It now expects net income of $10.1 billion to $11.5 billion for the full year, up from $9.8 billion to $11.2 billion in its earlier guidance.
That's mostly a reflection of the strength of GM's pricing to date in 2024. But GM investors should note one other thing: Despite last year's record-breaking deal with the United Auto Workers and the resulting big rise in labor costs, GM is still on track for a very strong 2024 result.
