Why General Motors (GM) Stock Is Up 7% This Week

General Motors Co GM shares are trading higher by 7% to $53.40 since Monday’s open. The company this week reported a third-quarter earnings beat and raised its 2024 guidance.

What Happened: GM delivered quarterly adjusted EPS of $2.96, above the analyst consensus estimate of $2.43. This earnings beat reflects GM's efforts to improve profitability across its core business and electric vehicle (EV) initiatives.

In its third-quarter report, GM posted adjusted earnings before interest and taxes (EBIT) of $4.115 billion, up 15.5% year-over-year, with an improved EBIT margin of 8.4%, a 30 basis-point increase.

GM also recorded quarterly revenue of $48.757 billion, marking a 10.5% increase from the previous year and surpassing the Street's estimate of $44.585 billion. Despite the higher revenue and EBIT, net income margin dipped slightly to 6.3%, compared to 6.9% a year ago.

General Motors raised its 2024 adjusted EPS guidance from a range of $9.50-$10.50 to $10.00-$10.50, citing strong demand and pricing power, particularly in North America.

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According to CFO Paul Jacobson, the average transaction price per vehicle remained above $49,000 during the third quarter, reflecting steady consumer demand despite broader market concerns. GM's North American EBIT exceeded expectations, thanks to favorable pricing and a $400 million production pull forward.

However, challenges in China weighed on GM's international performance, while its financial arm, GM Financial, posted better-than-anticipated results. The company also reported lower-than-expected spending on its autonomous vehicle subsidiary, Cruise and on corporate expenses.

Analyst Color: BofA Securities analyst John Murphy reiterated a Buy rating on GM, raising his price target to $85. Murphy was particularly encouraged by GM’s ability to navigate macroeconomic uncertainties while maintaining robust liquidity.

GM ended the quarter with $23.7 billion in cash and equivalents, alongside $8.5 billion in marketable debt securities. The company also reported an adjusted automotive free cash flow of $5.834 billion, further bolstering its financial position.

Murphy believes GM's potential EBIT in 2025 could match 2024 levels, with flat performance from the ICE business. However, GM's EV segment could see a $2 billion to $4 billion improvement, potentially driving total EBIT to $16 billion to $17 billion.

While Murphy's base case predicts EPS growth of around 10% to $11.45 by 2025, he acknowledges that with successful execution of share buybacks and operational improvements, EPS growth could surge between 20% and 30%.

In light of these factors, Murphy raised his 2024 EPS estimate for GM to $10.42 from $9.65 and his 2025 estimate to $11.45 from $10.25. He also emphasized GM's strong free cash flow generation and capacity for shareholder returns, including potential additional share buybacks.

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Is GM A Good Stock To Buy?

An investor or trader's decision to buy or sell a stock is unique to their time horizon and risk tolerance. Many typical investors evaluate earnings growth and valuation on a particular stock before making a decision.

For example, for General Motors, you'll notice that earnings in its last quarter grew 21.81% source. As an investor, you'll want to decide whether that's better or worse than what you'd like to see among stocks in your portfolio.

On the valuation side, General Motors's price to earnings ratio – a measure of how much an investor pays for the company's earnings – is grown 34.28% in the current quarter when compared with last year. That places it below similar businesses Tesla, Toyota Motor, Honda Motor Co in its sector. You'll need to decide whether that makes it more or less attractive based on how you think the company will perform over time.

There are many different valuation metrics that may help you make a decision. Find more on General Motors's quote page, or if you'd like a deeper dive in an advanced program, try Benzinga PRO for free.

GM has a 52-week high of $54.29 and a 52-week low of $26.30.