Reports Q1 results on Wednesday, May 5, before the market opens
Expected Revenue: $ 33 Billion
EPS expectation: $ 1.05
It was a remarkable start to the year for General Motors (NYSE :). The automaker's stock is up 38% so far, a performance three times better than its return for the period.
When the largest US automaker reports revenues tomorrow, investors will focus on the future amid today's chip shortages forcing carmakers to cut production.
GM Weekly Chart.
Automakers worldwide are facing a manufacturing crisis after strong demand for products such as laptops and cell phones caused chip shortages during the pandemic. According to Intel's (NASDAQ 🙂 new Chief Executive Officer Pat Gelsinger, the global increase in semiconductor demand is likely to continue for a few more years.
The company is reworking some of its factories to increase production and address the chip shortage in the auto industry, he said in an interview with CBS's 60 Minutes program. It may be at least several months before the pressure on the supply even starts to wane, he added.
GM rival Ford (NYSE 🙂 told investors last week that the chip shortage will reduce $ 2.5 billion this year from adjusted pretax earnings, the high range of the $ 1 billion estimate to $ 2 .5 billion it brought in in February. The company said the lack of semiconductors will force it to halve production in the second quarter, but expects the situation to improve after June.
Still, GM's first quarter earnings are predicted to show a strong recovery from the same earnings a year ago, when automotive demand collapsed during the first wave of the pandemic. GM car sales are up 3.9% in the quarter, the company said last month.
Solid Years Ahead
Strength in SUV deliveries, such as the mid-size Chevrolet Traverse and full-size Cadillac Escalade, helped offset the lower sales of vehicles that were impacted by temporary plant shutdowns in Ontario and Mexico.
Despite the scarcity of semiconductors leading to plant closures, GM expects a solid year of growth.
As GM's chief economist Elaine Buckberg said in a statement:
“Consumer confidence and spending will continue to increase as a result of stimulus measures, rising vaccination coverage and the gradual reopening of the economy. The demand for cars should remain strong all year round. "
Detroit-based GM is also preferred as its turnaround plan accelerates under the leadership of Chief Executive Officer Mary Barra, who unveiled more than $ 2 billion in new investment to support electric vehicles last year as part of its plan to buy gasoline. and diesel vehicles from showrooms worldwide by 2035.
These steps, coupled with strong sales, show that the company is in a better position to take on the industry's biggest disruptor, Tesla (NASDAQ :), which is well ahead in the electric car market & # 39; s.
According to Morgan Stanley auto analyst Adam Jonas, Barra & # 39; s strategic decisions, including leaving Europe and purchasing the self-driving tech start-up Cruise, have put the company on a better path to compete in the EV -market.
Bottom Line
GM is likely to show impressive earnings growth tomorrow, but the outlook for the future is uncertain due to a shortage of chips affecting automotive supply chains across the industry. That said, GM stock remains a better bet among traditional US automakers due to the company's impressive push to compete in the EV market.
