General Motors Q4 Earnings: Key Themes and Expectations

General Motors (NYSE: GM) is set to release its Q4 2024 earnings tomorrow morning before the market opens, with an earnings call scheduled for 8:30 a.m. ET. Analysts are anticipating EPS of $1.85 and revenue of $44.9 billion, according to FactSet Consensus estimates. Investors will also be closely watching GM’s full-year 2025 guidance, with expectations for EPS around $10.82 and adjusted EBIT guidance to be within the $14-$15 billion range.

Key Themes to Watch

Strong ICE and EV Performance

Despite broader challenges in the EV market, GM has delivered strong sales growth in both its ICE and EV segments. In Q4, GM’s EV sales jumped 50% year-over-year to 42,000 units, with the Equinox EV standing out as a key driver, posting an 85% quarter-over-quarter sales increase. Meanwhile, the company’s ICE vehicles, particularly SUVs and trucks like the Chevrolet Traverse, GMC Acadia, and Silverado, continued to exhibit strong pricing power and volume growth, which have supported adjusted EBIT margins. In Q3, EBIT margins expanded 30 basis points year-over-year to 8.4%, fueled by higher wholesale volumes and cost controls. Investors will be looking for similar trends in Q4.

Impact of Robotaxi Decision

During the quarter, GM made a significant decision to wind down its Cruise robotaxi operations, citing a lack of strategic partners and mounting financial losses. This move is expected to reduce annual spending by $1 billion starting in 2025, freeing up resources to focus on more profitable areas such as ADAS (Super Cruise) and personal vehicle autonomous driving systems. While the cost savings are seen as a near-term positive, the decision to exit the robotaxi market removes a once-touted growth pillar, leaving competitors like Alphabet’s Waymo and Tesla better positioned to dominate the space.

Tariffs and Policy Changes

Tariffs and potential changes in U.S. regulatory policy under the Trump administration could have significant implications for GM’s profitability. Proposed relaxations in emissions standards may provide near-term relief by easing the pressure to ramp up EV production, which is currently a loss-making segment for GM. However, potential tariffs on imports could drive up costs for the automaker, offsetting some of the expected benefits from relaxed regulations.

Analyst and Market Sentiment

Analysts remain cautiously optimistic about GM’s execution, especially given its robust performance in North America and recent strategic moves. Deutsche Bank recently upgraded the stock to “Buy,” citing the company’s focus on cost discipline, progress in China, and aggressive share buybacks. GM’s production in China rebounded significantly in Q4, growing by 50% sequentially and showing progress in aligning production with demand.

GM Halts Cruise Development

General Motors made the strategic decision to halt its Cruise robotaxi development, signaling a significant pivot away from a market once viewed as a key growth driver for the company. The decision, announced last October, is part of a broader restructuring effort to focus resources on GM’s core businesses of internal combustion engine (ICE) and electric vehicle (EV) production. By discontinuing its costly robotaxi operations, GM expects to reduce annual spending by over $1 billion, with the savings fully realized by the first half of 2025.

The Cruise unit, which has been a financial drag on GM, reported an adjusted EBIT loss of $1.28 billion and a cash flow deficit of $1.75 billion for the first nine months of 2024. Despite significant investment, GM struggled to find a strategic partner to support the venture, especially after a series of safety incidents and heightened competition from Alphabet’s Waymo and Tesla’s autonomous initiatives. By folding Cruise into its broader technology team, GM will now prioritize integrating autonomous driving technologies, such as its advanced driver assistance system (ADAS), into personal vehicles under the “Super Cruise” brand.

Strategic Implications: Cost Discipline vs. Growth Potential

GM’s decision reflects a pragmatic approach to capital discipline. The company has faced mounting pressure to improve profitability amid a challenging competitive landscape in both ICE and EV markets. With strong Q3 performance driven by volume growth in trucks, SUVs, and EVs, GM’s core businesses remain key profit centers. Trucks like the Chevrolet Silverado and GMC Sierra have bolstered margins, while GM's U.S. EV deliveries rose 60% year-over-year, crossing the 300,000-unit milestone in October.

However, analysts are divided on the long-term implications of abandoning the robotaxi market. GM once projected Cruise could generate $50 billion in revenue by 2030, making the decision to step away from the space a potentially missed opportunity. Alphabet’s Waymo and Tesla are now better positioned to dominate this emerging market, leaving GM to focus on a narrower scope of autonomous applications.

A Tactical Pivot to ADAS

While GM is stepping back from robotaxi development, it is not abandoning autonomous technology altogether. The company plans to expand its Super Cruise and Ultra Cruise systems, which offer semi-autonomous driving features in over 20 vehicle models. GM is also increasing its ownership stake in Cruise from 90% to over 97%, aiming to retain control of its technological advancements. These systems represent a more immediate and manageable revenue opportunity compared to the high costs and regulatory complexities of launching a robotaxi service.

Investor and Analyst Reactions

The market initially responded positively to the near-term cost savings, but GM shares later retreated as investors digested the implications of abandoning a key strategic pillar. Analysts, including Morgan Stanley’s Adam Jonas, have acknowledged the prudence of the move, noting that a $1 billion reduction in Cruise losses could boost GM’s FY25 EPS forecast by 2-4%. However, Jonas also highlighted concerns about GM ceding leadership in autonomous driving to competitors like Tesla and Alphabet.

Ultimately, GM’s decision underscores a shift towards prioritizing profitability and focusing on executable strategies. While the move reduces downside risks to cash flow, it also eliminates a long-term growth catalyst in the robotaxi space. For investors, GM’s pivot highlights the challenges of balancing innovation with fiscal responsibility in an increasingly competitive automotive industry.

General Motors Q3 Earnings: Strong Results and Raised Guidance Drive Optimism

General Motors delivered a robust Q3 2024 earnings report, beating expectations on both the top and bottom lines, while raising its full-year guidance. The company reported adjusted EPS of $2.96, far exceeding the $2.45 consensus estimate, and revenue of $48.8 billion, up 10% year-over-year and ahead of the $44.7 billion expected by analysts. This marked GM’s first quarter of double-digit revenue growth since Q2 2023, driven by strong pricing, volume growth in both internal combustion engine (ICE) and electric vehicle (EV) segments, and continued cost containment efforts.

Key metrics highlighted the strength of GM’s core operations. Adjusted EBIT rose 15.5% year-over-year to $4.12 billion, outpacing the $3.38 billion consensus, with an adjusted EBIT margin of 8.4%, up from 8.1% in the year-ago period. Automotive free cash flow was another standout, coming in at $5.83 billion, a 19% increase from last year. These results were bolstered by higher wholesale volumes and strong pricing, particularly from GM’s midsize SUVs, such as the Chevrolet Traverse, and full-size SUVs and pickups. Notably, GM’s North American adjusted EBIT reached $3.98 billion, a 13% increase from the prior year.

Raised Guidance Reflects Confidence in Execution

In light of its strong Q3 performance, GM raised its full-year guidance. The company now expects adjusted EPS of $10.00 to $10.50, up from the prior range of $9.50 to $10.50, and adjusted automotive free cash flow of $12.5 billion to $13.5 billion, significantly higher than the previous range of $9.5 billion to $11.5 billion. GM also adjusted the low end of its FY24 adjusted EBIT guidance to $14 billion, from $13 billion previously, with the high end remaining at $15 billion.

CEO Mary Barra emphasized GM’s strategic focus on balancing its profitable ICE business with efforts to make its EV and autonomous vehicle (AV) units more financially sustainable. The company is on track to achieve a $2 billion fixed cost reduction and reiterated its commitment to reaching EV profitability targets by 2024. Barra highlighted the momentum in GM’s EV business, with the Chevrolet Equinox EV emerging as a key product, offering affordability and over 315 miles of range. GM also reported strong performance from its luxury EVs, such as the Cadillac Lyriq and Escalade IQ, reflecting increased interest from high-end consumers.

Competitive Pressures and Regional Updates

While GM’s performance in North America was a standout, international markets presented challenges. Adjusted EBIT from international operations fell 88% year-over-year to $42 million, reflecting competitive pressures and macroeconomic headwinds. However, GM reported progress in China, where EV and plug-in hybrid sales outpaced ICE models for the first time. The company has also reduced dealer inventory in the region by over 50% year-to-date, allowing for better alignment of production with demand and improved cost management.

The EV market remains a key area of focus, with GM noting rising competition and higher incentive levels from competitors. GM aims to manage its portfolio to match consumer demand while maintaining pricing discipline. The company ended the quarter with ICE inventory levels at 68 days and 10-12 EVs per dealer, positioning it well for the seasonally strong Q4 sales period.

Market Reaction and Analyst Outlook

Investors reacted positively to the strong results, with GM shares rising nearly 4% in premarket trading and reaching their highest levels since February 2022. Analysts highlighted GM’s strong pricing power, volume growth, and cash flow generation as key drivers of its success. Morgan Stanley maintained its “Underweight” rating but acknowledged GM’s robust Q3 performance, while Barclays raised its price target to $70, citing a valuation that deserves to be higher than its current 5x multiple.

Despite the optimism, some analysts remain cautious about the long-term challenges facing GM. Morgan Stanley’s Adam Jonas flagged uncertainties in the EV market, competition, and China’s macroeconomic fundamentals as potential risks. However, GM’s ability to navigate these challenges while executing on its cost reduction and EV profitability targets underscores its resilience and adaptability.

Conclusion: Coming Off A Strong Quarter with Promising Outlook

Investors should focus on GM’s ability to maintain strong pricing and EBIT margins in its ICE and EV segments, the magnitude of its Q4 beat, and any surprises in its FY25 guidance. While the decision to halt Cruise operations provides cost savings, it raises questions about GM’s long-term growth catalysts. Tariff uncertainties and regulatory changes further underscore the importance of GM’s strategic execution in navigating a competitive and evolving automotive landscape.

GM’s Q3 results showcased its ability to leverage strong pricing and volume growth while addressing challenges in a competitive automotive market. The raised guidance and continued progress in EV adoption provide a solid foundation for future growth. While risks remain, particularly in international markets and the evolving EV landscape, GM’s strategic initiatives and operational performance position it well for sustained success. Investors and analysts will closely monitor the company’s Q4 results and FY25 developments to assess its ability to maintain momentum in an increasingly dynamic industry.