GM gives up early gains as earnings call tempers enthusiasm

Shares of General Motors (NYSE:GM) have surrendered generous premarket gains and are now almost 7% in the red as investors reacted negatively to cautious comments from CEO Mary Barra on the company’s earnings call with analysts, and amid worries about the company’s future in China.

The results comfortably beat expectations with profits up 60% and sales improving by 7% on strength in the company’s stalwart ICE category. Investors were also pleased with a hike to FY24 EPS guidance, above the Street’s consensus estimates.

And while CEO Mary Barra called it “a great first half,” her remarks were more measured on the company’s earnings call.

In China, the company hopes to return to profitability, but the rest of the year will remain “challenged if [market] headwinds are not heeded.”

Barra cited GM’s (GM) efforts to reduce inventory, align production to demand, protect pricing, and reduce fixed costs. But while steps taken have been “significant, they are clearly not enough,” she said.

In the electric vehicle category, the outlook is clouded by sluggish consumer demand and the potential for EV subsidies to end under a new presidential administration. Barra cites industry data showing steady growth in the sector but continuing to move slowly. To this end, Barra assured investors that the company will “make sure we are capital efficient and moving in lock-step with consumers.”

To that end, GM (GM) is shifting its development focus from the Cruise Origin to the next-generation Chevy Bolt amid regulatory uncertainty for the Origin and lower production costs for the Bolt. The pivot will cost the company $600M. GM (GM) is also delaying production of the 2024 Buick EV and the opening of the EV pickup plant to 2026.

With the focus shifting back to ICE vehicles, “the long-awaited turnaround for the GM story is now underway with stable pricing across its portfolio while focusing on margins and capital efficiency,” Wedbush’s Dan Ives said in a note on Tuesday, good news for investors looking for the stock to revisit the $50/share price.

While the morning’s price action suggests some profit-taking on the post-earnings gains, further selling pressure appears to be stymied by support at $46.

Competitors are also under pressure, with shares of Ford (F) down 2.4%, and Stellantis (STLA) nearly 4% in negative territory.