General Motors (GM, Financial) released its quarterly earnings results and mentioned that while it sold fewer vehicles, it did so at higher prices. As a result of this, the Detroit-based carmaker posted revenues of $35.79 billion, up 6.4% and beating expectations of $34.85 billion. Earnings per share came in at $1.87 compared with the street’s expectations of $1.25 and up 47% from the year-ago quarter.
The company was able to register positive income in the quarter and enter the green again from last year’s loss. GM’s net income surged to $2.5 billion compared with a loss of $2.98 billion in the year-ago quarter, as the sale of its European business to Groupe PSA led the company to report a massive loss.
While third-quarter sales declined 14.7% from the previous year, GM said it was able to raise its prices in the U.S. by an average of about $800 per vehicle to more than $36,000. Moreover, Cadillac sales in China were up 4% over the previous year and 20% so far this year.
"Our third-quarter performance demonstrates our determination to manage risks and deliver strong business results while continuing to advance the future of mobility," GM CEO Mary Barra said in a statement.
While North America deliveries fell 9.8% to 834,000, the increase in average prices helped GM post margins of 10.2%, despite tariffs causing input costs to rise. Although China deliveries declined 14.8%, they were still above North America deliveries, at 836,000.
GM CFO Dhivya Suryadevara said, “Our disciplined approach to the U.S. market, combined with strength in China and further growth of GM Financial, drove a very strong quarter.”
From an industry standpoint, the overall landscape suggests a slightly lower demand, as
U.S. auto sales declined around 1% last year and with rising commodity costs owing to President Trump’s tariffs, major automakers have trimmed profit forecasts. However, GM’s standing in the market has made the company post rather strong results, with domestic sales moving north on higher-priced trucks and crossovers, such as the Chevrolet Silverado and the GMC Denali.
Moreover, the company is also betting on the future landscape changing, with electric vehicles topping the sales charts. GM has multiple electric vehicles in its pipeline, while it works to reduce the pain point associated with usage of such vehicles, especially cost and charging.
“We believe in an all-electric future. I think you'll see that will roll out over the next couple of years.” Barra said. “We're looking to make sure we have EVs that are affordable, obtainable, desirable and have the right range.”
Also, ACDelco, GM’s auto parts subsidiary, is working to develop faster-charging options for this space.
From an innovation standpoint, GM announced a peer-to-peer car-sharing platform, where Chevrolet, Buick, GMC and Cadillac owners put their cars for rent when not in use. Moreover, GM’s self-driving car subsidiary Cruise automation tied up with Honda (HMC, Financial) earlier this year, to develop a self-driving car that’s currently being tested in San Francisco.
Talking numbers now, GM registered a three-year Ebitda growth rate of 32.9% compared with the industry median of 6.7%. Moreover, from a valuation standpoint, GM’s forward price-earnings ratio of 5.97 is well below the industry median of 10.89, leaving room for improvement.
Considering the tariff fears and falling sales from the world’s largest buyer, China, investors are bound to be skeptical at first. However, despite negative headwinds impacting the overall industry, GM has managed to post quite uplifting results and stay ahead of its peers.
Disclosure: I do not own any of the stocks mentioned.
