GM Earnings Beat Expectations, But Stock Plunges: What's Going On?

General Motors (GM) reported strong earnings for the fourth quarter and full-year 2024, beating analyst expectations for adjusted earnings per share (EPS) and revenue. Despite the positive results, GM's stock price plummeted, leaving investors scratching their heads. What's going on with GM's stock, and why is it getting crushed despite the earnings beat?



Firstly, let's examine the earnings results that should have sent GM's stock soaring. The company reported adjusted EPS of $1.92, up 55% year over year, and revenue of $47.7 billion, an 11% increase from the previous year's Q4. GM's North American segment achieved an EBIT-adjusted margin improvement of 1.2 percentage points to 5.3%, underscoring steady demand and operational effectiveness. Adjusted automotive free cash flow rose by 35.9% to $1.8 billion, reflecting improved liquidity and financial strategy implementation. These strong results should have been enough to propel GM's stock higher, but something else is at play.



One possible explanation for GM's stock price decline is the market's focus on the company's guidance for 2025, which excludes potential regulatory changes. While GM's guidance projects strong financial performance, with net income between $11.2 billion to $12.5 billion, adjusted EBIT of $13.7 billion to $15.7 billion ($11 to $12 adjusted EPS), and adjusted automotive free cash flow between $11 billion and $13 billion, the exclusion of potential regulatory changes introduces an element of uncertainty. If these changes were to materialize, they could negatively impact GM's financial performance, potentially leading to lower profits and cash flow than projected.

Another factor contributing to GM's stock price decline could be the market's reaction to the company's strategic pivot on its Cruise venture. GM reported substantial one-time charges, including a $4 billion impairment of its interests in certain China joint ventures and a $0.5 billion charge related to the decision to stop funding the Cruise robotaxi business. These charges reduced GM's fourth-quarter net income by more than $5 billion, influencing overall quarterly profitability. Investors may be concerned about the potential long-term implications of these strategic changes on GM's financial performance.



In conclusion, GM's earnings beat expectations, but the company's stock price plummeted due to a combination of factors, including the market's focus on the company's guidance for 2025, which excludes potential regulatory changes, and the strategic pivot on its Cruise venture. Investors should closely monitor GM's progress in achieving its ambitious benchmarks and be prepared for potential adjustments to its guidance if regulatory changes do occur. Additionally, GM's management should provide more clarity on how it plans to navigate these potential challenges to reassure investors and maintain confidence in the company's future performance.