GM shares sink as automaker signals rising cost pressures

Oct 20 — General Motors' third-quarter core profit rose sharply on the back of strong pickup truck sales, but its shares fell ​on Tuesday after the automaker signaled pressure in coming months from higher commodity costs and lower truck sales.

The company said quarterly earnings before interest and tax, not including one-time items (adjusted EBIT), rose 22% from a year earlier, to $4.1 billion. ‌That amounted to $3.70 per share, topping analyst expectations of $3.63, according to LSEG data.

It tightened its annual adjusted earnings-per-share forecast to between $12.75 and $13.75, the midpoint of which is below ⁠analysts' estimates of $13.41, according to data compiled by LSEG.

GM shares ​fell about 5% in morning trading.

"We think the selloff primarily reflects ⁠disappointment with the fact that the midpoint of its updated guidance is below" Wall Street's consensus, CFRA analyst Garrett Nelson said ‌in an investor note.

GM expects the ‌fourth quarter will be negatively affected by fewer truck deliveries as it prepares to launch redesigned versions of ⁠its Chevrolet Silverado and GMC Sierra, its biggest money makers.

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GM said commodity inflation, including higher expenses for logistics and computer chips, would total about $2 billion this year, the high end of its previous forecast. GM said it expects gross tariff costs will hit the lower end of a $2.5 billion to $3.5 billion forecast.

For next year, the company said "the path forward is more challenging," but reiterated that it expects results to be better, assuming continued strong consumer demand and a moderating of cost pressures on commodities and logistics.

"The consumer has held up ‌remarkably well. We should continue to watch it," GM CFO Paul Jacobson told analysts on ​the company's conference call. "We haven't seen anything that indicates any weakness."

But he said costs rose sharply over the last two months, specifically for steel, aluminum and logistics. He added that if commodity expenses don't ease from recent levels, they could weigh on GM's bottom line by $2 billion next year.

JP Morgan said investors "are likely to question conviction for now" because of rising costs and uncertainty over whether the company can sustain its rich sales mix of pricey trucks.

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GM's board approved a multi-year, $20 billion stock buyback program. GM has bought back about $29.5 billion of its own shares since 2023, driving ​down its overall share count to help its per-share profit results.

In the third quarter, it sold a higher mix of large pickup trucks and fewer electric ‌vehicles, which helped ‌the bottom line. The ⁠company has been pulling back on sales of EVs, which historically have lost money, following the Trump administration's withdrawal of support for them.

CFRA's Nelson noted that GM has lost U.S. market share this year and blamed competition from hybrid vehicles, a category in which GM is essentially absent. The automaker in the past decade went all-in on electric vehicles, deciding against offering hybrid vehicles, which now represent more ‌than 15% of US sales.

"The company ​faces a tougher road ahead due to its lack of hybrid offerings," he ‌said.

Barra told analysts on a conference ⁠call that GM "will have hybrids", ​although she declined to cite a timeline or other details.

(Reporting by Kalea Hall and Nathan Gomes; Editing by Mike Colias, Kirsten Donovan, Joe Bavier ​and Nick Zieminski)

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