GM Pumps And Dumps After Strong Beat But Warns On Chip Shortage; Guides Lower
General Motors reported earnings this morning, beating street estimates of $1.57 by posting $1.93 per share in net income. The company also beat on revenue of $37.5 billion versus estimates of $36.12 billion. The beat comes despite the costs the company had to bear due to the Takata airbag recall during the quarter. The sterling beat, however, was offset by a downbeat 2021 EPS guidance range of $4.50-$5.25, which was well below expectations of $5.99. One reason for the weak guidance – the company warned that the ongoing semiconductor could clip as much as $2BN in earnings.
Shares spiked initially but reversed course as traders digested the company’s cautious outlook.
Some more details:
- Q4 Revenue 37.52bln, vs exp. 36.12bln.
- Q4 Adj. EPS 1.93, vs exp. 1.64.
- FY2021 guidance fell below the street’s expectation of $5.99. GM said it expects EPS for the coming year to be in the $4.50 to $5.25 range.
- FY21 capex view 9-10bln “including accelerated EV/AV investments and deferred 2020 spend”
- Pretax adjusted earnings of $5.3 billion for Q3 and said the fourth quarter would be weaker due to seasonality and the company said it would be allocating $27 billion to EV and AV investments through 2025.
- The Company warned about the ongoing semiconductor shortage that we have been documenting over the last several weeks, saying it could clip $1.5 billion to $2 billion from the company’s earnings this year. The company said the the “global shortage of semiconductors will have a short-term impact on our production, earnings and cash flow in 2021”
The financials come amidst a broader mission shift for the legacy automaker, which, like many other automakers, is making a shift toward electric vehicles. “Delivering GM’s exciting new chapter is a team that embraces diversity and inclusion, a safe workplace, and the commitment to create a better, safer and more sustainable world,” CEO Mary Barra said. “I am deeply and personally engaged in this strategy, and I believe that our company’s strong values are a compelling advantage.”
The company also highlighted its job in bearing the brunt of the pandemic during the year: “When we paused production, our employees, dealers and suppliers acted with speed and agility to support our customers and communities, as well as to protect our business. I’m proud of the thousands of GM employees who raised their hands to produce critical-care ventilators or to make and donate personal protective equipment for frontline healthcare workers and schools,” CEO Mary Barra commented. “With the same speed and sense of urgency, what we call “ventilator speed,” we protected our liquidity as we developed rigorous safety protocols to safely restart operations at the appropriate time.”
Barra continued: “During the pandemic, we also found better and faster ways to work, and accelerated mission-critical growth businesses like our electric and self-driving vehicle initiatives.” These included:
- We increased our EV and AV investments to $27 billion from 2020 through 2025. That includes launching 30 EVs globally and achieving EV market leadership in North America. By mid-decade, GM is aiming to sell a million EVs per year in our two largest markets – North America and China, with our joint venture partners.
- Ultium Cells LLC, our joint venture with LG Chem, broke ground on a nearly 3-million-square-foot plant in Lordstown, Ohio that will produce millions of battery cells every year.
- We announced Ultifi, a reimagined, personalized EV customer experience with a single platform that simplifies discovery, education and management of GM products and services.
- And we introduced Periscope, a new safety brand that integrates vehicle technology, research and advocacy for policies that promote safer driving.
GM’s U.S. market share grew to 18% in the fourth quarter, up from 16.8% a year earlier. It also grew in China, where it claimed 12.1% of the world’s largest auto market in the fourth quarter, up from 11.9% a year earlier.
The company’s earnings presentation is below:
Wed, 02/10/2021 – 08:17