GM Q4 Earnings: Beating Expectations and Preparing for Future Challenges

General Motors (GM) delivered a strong Q4 performance, surpassing Wall Street expectations on both earnings and revenue. The automaker reported adjusted EPS of $1.92, beating the consensus estimate of $1.83, while revenue surged 11% year-over-year to $47.7 billion, well above the forecasted $44.46 billion. Adjusted EBIT came in at $2.51 billion, reflecting a 43% year-over-year increase. GM’s U.S. business remained the backbone of its profitability, with North American adjusted EBIT at $2.27 billion and vehicle sales increasing by 12% year-over-year to 876,000 units. The company also reported significant progress in its Cruise autonomous division, with revenue soaring to $181 million, a sharp increase from $25 million in the prior year.

GM's performance in China, however, remains a focal point as the company navigates challenges in the world's largest automotive market. While China operations were profitable in Q4, excluding restructuring costs, GM recorded a $4 billion charge associated with plant closures and other adjustments to streamline its operations. The company aims to turn its China business into a full-year profit contributor by 2025, though it acknowledged that profitability levels would remain below historical highs. Meanwhile, GM’s EV segment showed promising momentum, with sales accounting for 12.5% of the U.S. EV market in Q4, nearly doubling its market share year-over-year. For the first time, EV sales covered variable costs, marking progress toward profitability. GM is targeting a production volume of 300,000 EVs in 2025, representing a 60% increase from 2024.

Looking forward, GM provided strong 2025 guidance, projecting adjusted EPS of $11 to $12, above analysts' expectations of $10.60. Adjusted EBIT is expected to range from $13.7 billion to $15.7 billion, and adjusted automotive free cash flow is forecast at $11 billion to $13 billion. The company also outlined a capital expenditure plan of $10 billion to $11 billion, reflecting its commitment to scaling EV production, investing in autonomous technology, and navigating macroeconomic headwinds.

One looming uncertainty for GM is the potential imposition of tariffs on Mexico and Canada by the Trump administration. These tariffs could inflate costs across the U.S. auto industry, with GM particularly vulnerable due to its reliance on cross-border suppliers. CFO Paul Jacobson noted that GM has already expedited deliveries from Canada and Mexico to mitigate potential impacts but emphasized the need for clarity on the specifics of the tariffs before making further adjustments. CEO Mary Barra described her recent conversation with President Trump as “productive” and stated that GM is prepared to adapt once details emerge. Despite these challenges, GM’s strong results and robust guidance reflect its resilience and strategic focus in an evolving industry landscape.

Shares of GM are chopping around following the results. The guidance was a positive and should help the stock hold steady above the $50-psyche level. However, until we see greater clarity on tariffs, it is unlikely investors will try to aggressively bid shares higher, even though the valuation remains cheap at 5x forward earnings.