General Motors Co. (GM) is scheduled to release its third-quarter earnings before the bell on Tuesday as the ongoing auto workers strike intensifies.
Strike Impact and Expectations
Since mid-September, workers at GM, Ford Motor Co. (F), and Stellantis NV (STLA) have been on strike, deviating from the traditional United Auto Workers practice of striking at one carmaker at a time. The strike was recently extended to a Stellantis factory producing Ram pickup trucks.
Although the strike's impact on the third quarter is expected to be minimal as it only encompasses the first two weeks of the labor action within the July-September period, market attention will be focused on GM's guidance and how it could be influenced by the labor turmoil.
Below are the key expectations:
1. Earnings: According to analysts polled by FactSet, GM is projected to report adjusted earnings of $1.87 per share for the quarter. This figure compares with adjusted EPS of $2.25 in the third quarter of 2022.
2. Revenue: Analysts surveyed by FactSet anticipate GM to generate revenue of $42.5 billion in the quarter, compared to $41.9 billion in the same period last year.
3. Stock Performance: Over recent months, GM shares have underperformed the S&P 500 (SPX) index, dropping approximately 12% year-to-date. In contrast, the index has shown a positive growth of around 10%.
4. Other Factors: Earlier this month, GM announced a 21% surge in vehicle sales during the quarter, signifying some resilience against increasing interest rates.
As GM presents its earnings amidst the ongoing labor dispute, market participants will closely monitor the results and potential implications for the company's future outlook.
GM's Solid Financial Performance Expected
Analysts at Fitch Ratings have expressed optimism about General Motors' (GM) financial performance, stating that it is expected to be solid. This positive outlook comes despite the ongoing labor strike that has affected the company's operations. However, GM executives are likely to be cautious in their comments about the potential financial impact of the labor agreement.
Impact of Strike on GM's Prospects
John Murphy, an analyst at BofA Securities, is less positive about GM's prospects for the quarter. He believes that his estimates for both GM and Ford are below consensus due to the strike and anticipates a significant negative impact on GM's performance in the fourth quarter. In fact, GM has already reported costs of around $200 million caused by the first two weeks of the strike.
Significant Loss in Vehicle Production
Deutsche Bank analysts, led by Emmanuel Rosner, have estimated that the strike has resulted in a loss of approximately 61,722 vehicles that would have otherwise been produced by GM. This significant reduction in production output is likely to have further implications for the company's financial results.
Delay in Electric Vehicle Plant Opening
GM recently announced that it is delaying the opening of its electric-vehicle plant in the Detroit area by one year. The decision was made due to uncertainty about the demand for electric vehicles. The Orion plant, which is currently undergoing retooling to manufacture electric pickup trucks, will now open by late 2025 instead of the initially planned timing next year. Analysts are expected to inquire about GM's shift in tone towards electric vehicles. Just two years ago, GM had unveiled ambitious plans for electric vehicles, including a $35 billion investment in its "all-electric future."
Despite facing challenges from the labor strike and uncertain EV demand, GM remains confident in its ability to deliver solid financial results.
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