General Motors: Set Up for 2027 at 7x Earnings, Still Priced Like 40x

General Motors earned $3.57 a share last quarter. It also earned $1.41 a share. Same company, same quarter, and the difference between the two numbers is the entire debate around the setup into 2027 — because both are true, just about different things.

The accounting number is the bad news. GAAP net income fell roughly a third in the second quarter on $2.3 billion of fresh EV-related charges: payments tied to walking away from supplier contracts, rightsizing battery-supply joint ventures, and non-cash impairments. Since mid-2025 GM has recorded $10.9 billion of these charges, about $7.2 billion of it in actual cash, of which roughly $4.5 billion is already paid. Add it up and the trailing P/E reads roughly 40x, which is how a casual glance sees a company in apparent decline.

The adjusted number is the operating one, and it describes a different business. GM's "adjusted" results exclude the EV cleanup as one-time. On that basis, GM raised full-year 2026 guidance for the second time this year — to $12–$14 adjusted EPS, $14–$16 billion adjusted EBIT, and $9.5–$11.5 billion of automotive free cash flow, a measure that excludes the GM Financial lending arm that carries most of the consolidated debt. First-half adjusted EPS of $7.27 was a record, about a third above a year ago, as North America returned to an 8.6% adjusted EBIT margin, back inside its 8%–10% target, with pricing adding $700 million in the quarter alone.

The key to the story is that the charges are a correction, not a collapse. GM bet billions on a fast EV ramp, demand softened, and it is tearing down capacity it no longer needs while keeping its current EV trucks on sale. The core franchise never broke — GM held more than 42% of the U.S. full-size pickup market in the first half — and management says the largest cash pain is getting close to the rearview mirror, with the material cash charges "substantially complete." The same price is being valued two ways: about 40x on the trailing income statement, around 7x on forward earnings, because the market cannot agree whether the drags are finishing or permanent.

What makes 2027 the better year, rather than a hope, is that the calendar does the work. The next-generation Chevrolet Silverado and GMC Sierra reach dealerships in December, and the changeover deliberately suppresses the fourth quarter — the second half of 2026 is guided weaker than the first half because GM is retooling its most profitable franchise. The market pays roughly 6.5x for a guidance number that bakes in a soft Q4, then gets a full year of the new trucks in 2027. Jefferies upgraded GM to Buy with a $99 target on exactly that read, citing confidence that 2027 would strengthen GM's U.S. position and deliver more than $10 billion of real free cash flow.

Two other drags are scheduled to fade in step. GM is targeting a $1–$1.5 billion improvement in EV losses this year, and the software engine compounds meanwhile: more than $3 billion of recognized software and services revenue this year, OnStar at roughly 70% gross margin, and $6.3 billion of deferred revenue on the books, up almost half from a year ago. That last figure is contracted money GM has collected but not yet recognized — a banked backlog, not a promise. U.S. production capacity above 2 million units next year is meant to cap the tariff hit, though the gross tariff bill for 2026 still runs $2.5–$3.5 billion, and the guidance assumes no further escalation in the Middle East.

Then there is the share count, the quiet accelerator. GM has cut diluted shares by about 35% since mid-2023, to roughly 893 million, down 8% in the past year, and spent $2 billion on buybacks in the second quarter alone, with about $3.5 billion of authorization left. That turns even flat operating profit into compounding EPS, which is why the adjusted math keeps advancing while revenue barely moves.

The honest counter is that the setup is partly visible in the price already. The stock is up nearly 50% over the past year and sits near its high, a roughly $75 billion market cap against a 13%–15% free-cash-flow yield on the company's own guidance. AInvest's aggregate signal labels the stock a Buy with a strong fundamental score of 8.35, and sell-side targets average around $101 against the $85 price. Real upside, but this is not a bargain-bin discovery out of a fallen stock; it is a company whose guided year is deliberately depressed so the next one lands clean.

That leaves the multiple standing on one syllable: done. If the EV-loss improvement fails to show up, if the December truck launch discounts away its pickup share, or if tariffs escalate past the assumption, roughly 7x is fair or generous — and GM has already shelved its next-generation full-size EV trucks, trading long-term optionality for cash. But at roughly 6.5x the midpoint of a guidance number raised twice this year, off a record first half, with a shrinking share count and a banked software backlog, the market is pricing the quarter GM chose to suppress rather than the year it is building. The question was never whether the trucks make more money. They do. The question is whether the write-downs are done, and nothing else moves the multiple.