Shares of General Motors were sent plummeting by more than 5% on Wednesday morning, after the automaker missed earnings estimates amid mounting warranty recall costs.
GM shares were very close to hitting a five-month low, as the company’s second quarter earnings fell short of analysts’ expectations, despite reporting a record operating profit and boosting its guidance for the year. The automaker reported an adjusted earnings-per-share of $1.97, against forecasts calling for an EPS of $2.23, while revenue rose to $34.17 billion, beating estimates calling for revenue levels of $30.9 billion.
Despite the mixed results, GM also absorbed $1.3 billion worth of warranty recall costs, with most being associated with the Chevy Bolt. In July, the automaker revealed that two Bolts had spontaneously burst into flames, with one of the incidents being related to issues with the battery, despite the owner repairing a previous related recall. Due to the fire risk, GM was forced to recall all Bolt EVs manufactured between 2017 and 2019, amounting to a total of 68,000 affected vehicles.
Even amid the dismal recall, GM still boosted its full year guidance from a range of $4.50 to $5.25 per share to anywhere between $5.40 and $6.40 per share. The automaker also conceded that it continues to battle ongoing challenges related to the global semiconductor shortage, which has resulted in a number of temporary factory shutdowns and will likely cost the automaker billions of dollars come year-end earnings.
Information for this briefing was found via General Motors and Bloomberg. 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.