General Motors Co. (GM, Financial) released its fourth-quarter and full-year 2020 results before the opening bell on Feb. 10. Earnings surpassed Wall Street's expectations as sales of highly lucrative trucks and SUVs rose in North America. Additionally, a robust product lineup, disciplined pricing and continued cost actions pushed the automaker's results higher.
Shares climbed 1.3% in premarket trading following the earnings announcement.
Quarter in review
The Detroit-based automaker posted earnings of $1.93 per share during the quarter, up from 5 cents reported in the prior three-month period. Revenue of $37.5 billion surged 23% compared to last year. Analysts had predicted earnings of $1.64 per share on $36.12 billion in revenue.
For full-year 2020, GAAP earnings came in at $4.33 per share, while adjusted earnings stood at $4.90 per share. Revenue of $122.5 billion reflected an 11% year-over-year decline.
Looking back, GM recorded a $758 million loss in the second quarter due to Covid-19-induced factory shutdowns as well as dealership closures.
The company's North American operations recorded adjusted Ebit of $2.6 billion. That compares with $0.3 billion of adjusted Ebit earned in the year-ago period. It attributed the strong performance to disciplined incentives and benefits resulting from cost actions. The segment's pre-tax profit margin was 8.7%.
The international segment earned $0.3 billion pretax in the fourth quarter. Strong China sales contributed to the segment's profitability as sales rose 37% in the region.
Chairman and CEO Mary Barra commented on the company's performance:
"GM's 2020 performance was remarkable by any measure, and even more so in a year when a global pandemic caused companies around the world – including GM – to temporarily suspend manufacturing operations to keep employees safe. Our dealers also took extraordinary steps to protect our customers, such as providing seamless online shopping, purchasing and delivery solutions."
At quarter's end, total automotive liquidity was $40.5 billion, including cash and cash equivalents of $22.3 billion.
Performance in the domestic market
U.S. sales were down 12% for the year to 2,547,339 units, but improved quarter-by-quarter as a result of strong sales of crossovers, full-size pickups and SUVs. In regard to crossovers, the Chevrolet Blazer recorded its best-ever year, while Cadillac XT6 sales increased 95.6% as compared to 2019. Large pickups experienced robust sales thanks to impressive performance of Chevy Silverado (up 3.2%) and GMC Sierra (up 8.9%). Likewise, SUVs sold well as the Chevrolet Tahoe and Suburban as well as the GMC Yukon and Cadillac Escalade experienced a combined 1 percentage point gain in retail market share.
Update on EVs
General Motors announced it will invest $27 billion in U.S. manufacturing to support the production of electric and autonomous vehicles. The company's investment in U.S. manufacturing sites makes sense since it plans to roll out at least 30 new electric vehicles worldwide by 2025.
In fact, the company revealed the GMC Hummer EV supertruck in October, which happens to be its first EV powered by the Ultium battery system. The Hummer's production will commence in the fall of 2021 and will be sold at GMC brand dealerships at a starting price of $80,000.
Guidance
General Motors anticipates adjusted pretax profits to fall within the $10 billion to $11 billion range, or $4.50 to $5.25 per share, in 2021. Adjusted free cash flow is estimated to be between $1 billion and $2 billion. Factoring in the effect of a worldwide semiconductor chip shortage, the company's free cash flow could decline by $1.5 billion to $2.5 billion.
Disclosure: I do not hold any positions in the stocks mentioned.
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