Third-quarter earnings at
General Motors
beat Wall Street expectations. That’s good news, but what management is going to say about labor, costs, and interest rates will probably matter more for the stock in the coming weeks.
GM (ticker: GM) on Tuesday reported third-quarter operating profit of $3.6 billion and earnings per share of $2.28 from sales of $44.1 billion.
Wall Street was looking for an operating profit of $3.3 billion and earnings per share of $1.87 from sales of $42.5 billion. In the third quarter of 2022, GM reported an operating profit of $4.3 billion and earnings per share of $2.25 from sales of $41.9 billion.
Operating profit from GM’s key North American division came in at $3.2 billion, down from $3.9 billion a year ago. Operating profit margins came in at 8.6%, down from 11.2%.
GM stock is up 1.1% in premarket trading, while
S&P 500
and
Dow Jones Industrial Average
futures are up 0.5% and 0.3%, respectively. An earnings beat is always welcome, but investors have other things on their minds.
Top of mind is the United Auto Workers strike that began on Sept 15. Some 9,300 GM workers are on strike, about 20% of the company’s UAW-represented workers.
The strike was too recent to materially affect the third quarter, but GM removed full-year guidance from the earnings presentation. In the second quarter, GM said it saw full-year operating profit of $12 billion to $14 billion.
GM published details Friday of an offer made to UAW leadership. It includes wage increases in the range of 25% cumulatively over four years. Wage increases have inflation protections included as well. There are also improvements to retirement benefits, workers’ progression to higher pay grades, profit-sharing, and time off.
UAW President Shawn Fain responded by indicating the union would ask for more. Tuesday will be a chance for investors to hear more from CEO Mary Barra about how the strike could end, and how far GM is willing to go on wage and other concessions.
GM management hosts a conference call at 8:30 a.m. Eastern time.
The strike has weighed on GM stock for months. Coming into Tuesday trading, GM stock has fallen about 24% since the start of July. The S&P 500 has declined about 5% over the same span.
The strike can’t be blamed for all the losses though. The economy still matters. Higher interest rates are making purchasing cars more expensive. Many new cars are bought with some form of financing.
Tesla
(TSLA) CEO Elon Musk lamented the impact higher interest rates was having on EV pricing and demand on his company’s second-quarter conference call.
Tesla has been cutting prices to help offset the impact of rates. It has hurt profitability. Tesla reported second-quarter operating-profit margins of less than 8%, down almost 10 percentage points year over year.
Tesla stock fell more than 9% after its earnings report, putting the issue of rates in focus for all auto investors. GM’s outlook on rates, and how it plans to compete with now-lower-priced Tesla EVs will be among the other things investors are focused on during the conference call.
GM is still focused on growing its EV business, and expects to have the capacity to make one million EVs in North America by the end of 2025. GM sold 20,092 EVs in the U.S. in the third quarter, up from 15,156 a year ago
The company is a long way from a one million EV production or sales run rate, but the third-quarter numbers included sales of the electric Silverado and Blazer for the first time. That adds to sales of the electric Bolt, Lyriq, Hummer, and BrightDrop delivery van. GM’s EV product lineup is getting bigger.
Write to Al Root at allen.root@dowjones.com
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