What GM, Ford investors should know ahead of third-quarter earnings
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Detroit’s Renaissance Center is home to the General Motors global headquarters.
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DETROIT – Both General MotorsAnd Ford MotorThey are expected to post solid earnings for the third quarter Wednesday, despite ongoing disruptions in supply chain global. This includes a shortage semiconductor chips which has depleted car inventories but increased profits.
Detroit’s automakers did their best during disruptions. They were able to boost earnings on record profit and vehicle pricing, thanks in part to the resilient demand from consumers. According to analysts, this is expected to continue as the industry rebuilds inventory.
Credit Suisse analyst Dan Levy stated in an investor note that both should benefit from positive fundamentals in an environment of upcycling, and both have an opportunity to enhance perceptions on their long-term position in an EV/AV market.
Ryan Brinkman, JP Morgan’s analyst, raised expectations to foresee a big beat in the case GM. He also increased Ford estimates slightly above consensus to make them more in line with in-line. However, he pointed out that Ford’s output was likely to grow while GM production was predicted to decrease.
This is what Wall Street analysts are expecting from the third quarter earnings of each automaker. Also, there are other important things that investors should be aware about before GM reports prior to Wednesday’s market opening. Ford follows after.
Wall Street estimates
Refinitiv’s analyst estimates show that GM will report earnings per share at 96c and revenues of $26.5 billion. This is 25.3% less than a year ago.
Ford expects to earn 27c per share from $32.5billion in automobile revenue, which is down 6.2% according to Refinitiv.
Second-half Expectations
Executives at GM and Ford both stated that the second-half of this year will be more difficult than the first six.
GM warned previously investors that North American wholesale volumes could be affected by the recession. down by about 200,000 unitsComparable to the first half, the second-half of 2021 saw an increase in earnings. The company has maintained its financial guidance for 2019, with adjusted earnings between $11.5 billion to $13.5 billion or $5.40 and $6.40 per share. In the first six months, it earned $6.2 billion or $4.21 per share.
GM expects to see a drop of $3.5 to $4.5 Billion due to a rise of commodity costs of $1.5 billion-2 billion and lower earnings by its financial arm.
Ford increased its guidance for this year in July but told investors that the second half would be less than the first. regarding its operating profitThe company’s adjusted earnings before taxes stood at $5.9billion through June. The company increased its guidance for full year adjusted earnings before tax by approximately $3.5B to between $9 billion – $10 billion.
Emmanuel Rosner from Deutsche Bank believes that the automakers will continue to lead to the highest end of their ranges, if possible.
We expect Ford and GM both to surpass 3Q consensus estimates, and keep/raise full year guidance. “We see many potential catalysts for both companies,” he stated in Monday’s investor note. He cited electric and self-driving vehicle development.
EVs/AVs
The automakers invest billions in autonomous and electric vehicles but the segment is unlikely to contribute significantly to third-quarter earnings.
In the third quarter of 2018, both automakers provided significant details on their plans for the two emerging sectors. This included Ford’s $11 Billion investment in U.S. production facilities that will produce batteries and electric vehicles.
GM spoke out at an investor meeting earlier in the month, stating that it aims to double its revenue and increase profit margins by between 12%-14% by 2030. Cruise, which is GM’s majority owned subsidiary, also stated it will begin charging for the robotaxi service in San Francisco next year. However this remains subject to regulatory approval.
GM stated that it will recognize a $1.9 billion recovery from the third quarter to offset the $2.0 billion charges related to an ongoing recall for Chevrolet Bolt EVs. This was part of a settlement reached with LG.
Buildings in partial
Ford’s stock rose by around 80% last year. Therefore, investors should be on the lookout for additional negative impacts to Ford going into next year.
The automaker will also be updating them on any news regarding the production or shipments of Ford F-Series pickups. This is a vehicle that Ford, just like GM has partially built to complete when chips are available.
According to Reuters, Steve Carlisle is GM’s North American Chief Executive. He said that the company has shipped more than half of its newly assembled pickups, which it had parked because there was a shortage in semiconductor chips.
GM reported a 32.8% year-over-year decline in sales for the third quarter earlier this month. However, GM stated that the situation with semiconductor chips was improving. Nov. 1 is expected to mark the first time since February that none of GM’s North American assembly plants will be idled due to the chip shortage. Two remain closed for repair and others are working on fewer shifts.
GM’s stock has increased by around 40% through 2021
– CNBC’s Michael BloomContributed to the report.
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