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General Motors (NYSE:GM) is poised to report its Q2 2024 results shortly. We expect earnings for the quarter to come in at $2.70 per share, slightly ahead of consensus and up by almost 40% compared to last year, while revenues are likely to grow by about 1% year-over-year to $45.2 billion. GM stock has gained about 30% this year, driven by expectations of improving profitability and higher truck sales. This compares to rival Ford stock (NYSE:F), which has seen its stock rise 6% over the same period. See our analysis of GM Earnings Preview for a closer look at what to expect when the company publishes earnings.

Retail automotive sales have been cooling down of late as consumer confidence in the U.S. weakens and high interest rates make financing vehicle purchases more expensive. While consumer prices in the U.S. have been rising, with the CPI up 3.3% in May, the most recent data available, shows car prices have been declining. The average price paid for new vehicles declined by 3% for the first six months of this year, compared to the same period last year, per research firm J.D. Power. Moreover, the broader automotive industry was impacted by cyber attacks on dealer software provider CDK Global, a development that impacted sales during the second half of June in about half of all dealerships in North America.

That said, GM appears to be holding up better than the broader industry. The company reported its delivery numbers for the U.S. indicating that it sold a total of 696,086 vehicles for Q2, up 0.6% from a year ago. GM’s full-size trucks sold a total of 229,000 units during the quarter, up 6% year-over-year. This should prove positive for the company, as higher sales of high-margin Chevrolet and GMC brand pickups and SUVs could help the company boost its profits. GM’s new deal with the United Auto Workers last November is also likely to be having a softer-than-expected impact on the company’s earnings thus far. While wages increased about 11% when UAW approved the new contract, GM raised its adjusted pre-tax profit projection for this financial year to $12.5 billion to $14.5 billion, from its previous range of $12 billion to $14 billion.

GM stock has witnessed gains of 15% from levels of $40 in early January 2021 to around $45 now, vs. an increase of about 50% for the S&P 500 over this roughly 3-year period. However, the increase in GM stock has been far from consistent. Returns for the stock were 41% in 2021, -43% in 2022, and 7% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that GM underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the mega-cap stars GOOG, MSFT, and AAPL.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could GM face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Although there are concerns about the broader automotive market, there are some positives for GM. While the slow pace of GM’s EV transition was a headwind for the stock previously, this could ease a bit. The EV market has been slowing down with EV bellwether Tesla seeing its sales decline year-over-year for the first half of 2024. Slower growth in EV demand could give players such as GM more time to monetize gas-based vehicles while investing in long-term electric vehicle developments. GM’s stock also looks fair at current levels of about $46 per share or under 5x consensus 2024 earnings. We have a $45 price estimate for GM, which is roughly in line with the current market price. See our analysis on General Motors Valuation: Expensive Or Cheap for more details on what’s driving our price estimate for GM. For more information on GM’s business model and revenue trends, check out our dashboard on General Motors Revenue: How GM Makes Money.

[1] Returns as of 7/9/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.