General Motors May Say Higher Costs Offset Sales Growth

GMC SUV display at a Buick GMC dealership.

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General Motors (GM), the largest U.S. automaker by sales, will probably say earnings and margins contracted in the first quarter, with higher costs eroding the benefit of sales growth.

Key Takeaways

  • General Motors is expected to report adjusted earnings per share of $1.63, down from $2.09 a year ago.
  • The company has missed earnings estimates just once since March 2020.
  • Electric vehicle tax credits could be a boon as the company competes for market share.

GM likely will report net income of $2.28 billion, or $1.63 a share, according to estimates compiled by Visible Alpha. The company earned $2.94 billion, or $2.09 a share, in the same period last year. Revenue is expected to climb 8% year-over-year to $38.9 billion. Total costs and expenses, however, are also expected to rise 11.5% to $35.4 billion.

GM has beaten consensus estimates by an average of 22.6% in the last two quarters and has only posted one earnings miss since March 2020. GM will report its first quarter 2023 earnings before markets open Tuesday.

GM delivered 603,208 vehicles—20,000 of them electric—in the U.S. during the first quarter, an 18% increase from the prior year. The Buick and Cadillac brands led the way with a sales increase of 99% and 29% respectively. The company estimates it gained 1.5% market share over last year.

In China, the world's largest automobile market, the company sold over 462,000 vehicles in the first quarter, a 25% decrease from the same quarter last year.

Investors will be comparing GM results to the latest earnings from rival automaker Tesla (TSLA), which also reported increased sales but posted disappointing margins after a string of aggressive price cuts. General Motors has said it won't follow Tesla's lead and cut prices.

"Right now, based on the interest we're seeing, the pricing we put out was very appropriate," CEO Mary Barra said during GM's fourth-quarter earnings call in January.

GM's electric vehicle sales could benefit from changes to the $7,500 federal EV tax credit requiring certain amounts of battery and mineral components to be produced in the U.S. or a country with which the U.S. has a free trade agreement. General Motors says all of its electric vehicles below the credit's price cap qualify for a full $7,500 credit under the new rules.

GM shares are flat for the year, compared with a 14.8% increase in the Consumer Discretionary sector.

Total year-to-date return of GM stock, S&P 500, and S&P 500 Consumer Discretionary Sector (as of Apr. 22, 2023)

The Key Metric

Like Tesla, the key metric for General Motors will be its gross margins for the first quarter period. GM is expected to post gross margins of around 13%, a slight decline from 14% a year ago.

General Motors Key Metrics
   Q1 2023 (est.)  Q1 2022  Q1 2021
 Diluted earnings per share ($)  1.63  2.09  2.25
 Revenue ($B)  38.9  36  32.5
 Gross margin (%)  13.15  14.02  14.36
Source: Visible Alpha
Article Sources
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