On Wednesday, JPMorgan updated its outlook on General Motors (NYSE:GM), increasing the price target to $60 from $58, while maintaining an Overweight rating on the stock. The adjustment follows General Motors' announcement on Tuesday of first-quarter earnings that surpassed expectations, with higher than anticipated earnings before interest and taxes (EBIT), cash flow, and earnings per share (EPS).
General Motors reported a robust first-quarter EBIT of $3.871 billion, significantly outperforming the Bloomberg consensus of $2.926 billion and JPMorgan's own estimate of $2.918 billion.
This success was attributed to both higher sales and a margin of 9.0%, compared to the projected 7.0% consensus and JPMorgan's estimate of 7.1%. The automaker's EPS also exceeded forecasts, coming in at $2.62 versus the consensus of $2.03 and JPMorgan's prediction of $2.30.
The company's strong performance led to a slight increase in free cash generation, reporting $1.1 billion against the expected $1.0 billion. The positive results were primarily driven by GM North America, which saw an EBIT of $3.8 billion, exceeding JPMorgan's model of $2.9 billion due to stable pricing year-over-year.
However, GM International faced challenges, particularly in China, where competition from domestic automakers, especially in the battery electric vehicle segment, resulted in losses.
While GM's Cruise segment reported losses of $442 million, in line with JPMorgan's estimate, it reflected a planned reduction in investment. Corporate Costs came in lower than expected at $243 million, compared to the forecasted $325 million. GM Financial also performed slightly better than anticipated, helped by a modestly better trend in US used vehicle prices during the quarter.
In light of these results, General Motors has increased its guidance for 2024, now expecting EBIT to range between $12.5 billion and $14.5 billion, with a midpoint up from $13.0 billion to $13.5 billion. EPS guidance for 2025 has also been raised to $9.00-$10.00, with the midpoint increasing from $9.00 to $9.50. Consequently, JPMorgan has raised its 2024 EPS estimate to $9.35 from $8.80 and its 2025 EPS forecast to $8.75 from $7.50.
InvestingPro Insights
General Motors (NYSE:GM) has recently demonstrated a strong performance in the market, catching the attention of investors and analysts alike. With a Market Cap of $52.06 billion and a compelling P/E Ratio of 5.32, GM stands out for its value proposition. The company's adjusted P/E Ratio for the last twelve months as of Q1 2024 is an even more attractive 5.16. These figures are complemented by a PEG Ratio of 0.26 during the same period, suggesting that GM's stock price may not fully reflect its earnings growth potential.
InvestingPro Tips highlight that management's aggressive share buybacks and positive adjustments in earnings forecasts by analysts could signal confidence in GM's strategic direction. Furthermore, with a strong free cash flow yield implied by its valuation and trading at a low earnings multiple, GM presents a potentially undervalued opportunity for investors. It's worth noting that analysts predict the company will be profitable this year, and it has indeed been profitable over the last twelve months.
For those considering an investment in General Motors, there are 13 additional InvestingPro Tips available, which could provide deeper insights into the company's financial health and market position. To further empower your investment decisions, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. Remember, a well-informed investment is a step towards success.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.