General Motors Reports Strong 3Q 2022; Stock Continues to Look Inexpensive

General Motors Company (NYSE: GM) on Tuesday reported much better than expected 3Q 2022 results. Diluted 3Q 2022 EPS was US$2.25, beating analysts’ consensus projections of US$1.88. GM recorded US$1.52 of adjusted diluted EPS in the year-ago period.  

Remarkably, the company reported 3Q 2022 operating cash flow of US$5.3 billion versus approximately breakeven in 3Q 2021. In 3Q 2021, supply constraints from a global shortage of semiconductors had an enormous effect on its cash flows.

Somewhat surprisingly, GM did not boost its full-year 2022 EPS or adjusted EBIT guidance because of various “headwinds” the company faces. GM expects to hit the midpoints of its US$6.50-US$7.50 EPS and US$13.0 billion-US$15.0 billion adjusted EBIT ranges. GM’s adjusted EPS and adjusted EBIT are US$6.08 and US$13.5 billion, respectively, for the 12 months ended September 30, 2022.

GM delivered 556,000 vehicles in the U.S. in 3Q 2022, up from 447,000 a year ago. Its share of the U.S. car market reached 15.9% in 3Q 2022 compared with 12.8% a year ago. GM’s share of the U.S. electric vehicle market reached about 8% in the just-completed quarter due to strong sales of the Chevrolet Bolt EV. In comparison, Tesla, Inc. (NASDAQ: TSLA) accounts for about 60% of that market.

GM’s Automotive revenue rose about 65% in the third quarter, an unusually large increase for a company of its size. Similarly, its cash and marketable debt securities balance at September 30, 2022 — US$30.3 billion —  increased US$12.4 billion from June 30, 2022. The improved results trace partly to the company’s prioritizing the production of high-margin SUVs and pickup trucks given still-limited auto component supply, as well as less need to provide incentives to customers.

(in millions of US $, except for EPS and shares outstanding)3Q 20222Q 20221Q 20224Q 20213Q 2021
Automotive Revenue$38,703$32,814$32,823$30,349$23,424
Operating Income$3,392 $1,689 $2,196 ($1,898)$1,645 
Diluted Adjusted EPS$2.25 $1.14 $1.35$1.35$1.52 
Operating Cash Flow$5,315 $3,000 $2,104$6,809($49)
Cash – Period End$30,311 $17,908 $26,256$28,676$23,940 
Automotive Debt – Period End$18,783 $16,909 $16,892$16,818$17,022 
Shares Outstanding (billions)

Of course, if a marked economic downturn were to occur, GM’s sales will likely be affected. Presumably, one of the first casualties of a recession will be big-tickets items. GM’s CFO, Paul Jacobson, says the company has not yet experienced any “direct impact” on its vehicle sales.

Nevertheless, General Motors shares, which trade at a P/E ratio of only 5.4x (based on the midpoint of company guidance), look inexpensive. The stock has rallied off a US$31 low in July, but is still down 45% since early January. On the other hand, GM’s low valuation may not fully shield the stock if investor concerns reignite that the likely magnitude of Fed tightening has not been fully discounted in the stock market.

General Motors Company last traded at US$38.14 on the NYSE.

Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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