Strong Earnings Drive GM Analyst Expectations Higher, ICE Segment More Resilient Than Expected

General Motors Co GM caught an upgrade from Morgan Stanley on Monday and shares are reacting positively. 

What Happened: Morgan Stanley analyst Adam Jonas upgraded GM from Equal-Weight to Overweight and raised the price target from $35 to $38, citing oversold conditions, which has created an attractive risk-reward setup in the name.
The upgrade comes on the heels of better-than-expected quarterly results from the Detroit-based automaker. 

See Also: GM's Cruise Goes the Extra Mile with 24/7 Robotaxi Rides, But Profitability Remains Out of Reach

General Motors, among the top five stocks in Morgan Stanley's automotive and auto-related coverage umbrella, recently reported first-quarter revenue of $39.98 billion.

The car manufacturer beat consensus estimates of $38.95 billion and topped earnings expectations, turning in adjusted earnings of $2.21 per share, ahead of estimates of $1.71 per share.

The strong print and improved guidance helped drive a $3 increase in the analyst firm's 12-month price target. Jonas raised his bull case price target from $50 to $60, while maintaining a bear case price target of $20. 

"The shares offer nearly 90% upside to our revised $60 bull case and 40% downside to our $20 bear case for a favorable 2:1 bull-bear skew," Jonas said. 

Jonas also revised his expectations for GM's internal combustion engine (ICE) business, noting it is proving to be more resilient than he previously expected. Jonas now anticipates a "more gradual de-adoption" of ICE vehicles in the U.S.

GM has also demonstrated capital discipline given the uncertain environment. Jonas highlighted recent production cuts aimed at controlling inventory levels and noted that GM is still taking share while operating efficiently. 
"Cost savings are progressing faster than we and GM had anticipated," Joans said, anticipating an attractive risk-reward opportunity in GM shares on both a relative and absolute basis.

See Also: Not So Fast! Canada's Trudeau Signals Caution In Response To Takeover Bid Of Copper, Coal Miner Teck Resources

GM Price Action: General Motors shares were up 3.11% at $34.07 at the time of writing, according to Benzinga Pro.

Photo: Courtesy of GM.