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GM Beats Wall Street's Third-Quarter Estimates, Guides Toward ‘High End' of 2021 Earnings Forecast

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  • General Motors on Wednesday topped Wall Street's earnings and revenue estimates for the third quarter.
  • The automaker told investors its full-year results would be at the "high end" of its previous guidance.
  • GM's guidance includes earnings between $11.5 billion and $13.5 billion on an adjusted basis, or $5.70 to $6.70 a share and between $8.1 billion and $9.6 billion on an unadjusted basis.

DETROIT – General Motors on Wednesday topped Wall Street's earnings and revenue estimates for the third quarter, while telling investors its full-year results would be at the "high end" of its previous guidance.

The third quarter was expected to be a rougher one than the first half of the year for GM. Analysts, however, said they projected relatively solid results, despite a global shortage of semiconductor chips that has depleted vehicle inventories and shuttered plants.

Here's how GM performed, compared with analysts estimates as compiled by Refinitiv:

  • Adjusted earnings: $1.52 a share vs. 96 cents a share estimate
  • Revenue: $26.78 billion vs. $26.51 billion estimate

Shares of GM were down nearly 5% in midmorning trading Wednesday, despite the big earnings beat. The automaker lowered its expected annual automotive free cash flow and didn't meet investor earnings expectations for the remainder of the year.

Assuming GM delivers earnings near the high end of its forecast, that would imply its fourth-quarter earnings before interest and taxes, a key performance measure, would come in around $2 billion instead of the $2.6 billion Wall Street was hoping to see, Credit Suisse analyst Dan Levy wrote Wednesday in an investor note. "While the print did not provide the beat or guidance raise some hoped for, and thus could drive a more muted reaction in the stock, we nevertheless see reason to be positive on GM."

Guidance

GM previously told investors it would earn between $11.5 billion and $13.5 billion on an adjusted basis and between $8.1 billion and $9.6 billion on an unadjusted basis. The company raised its adjusted earnings per share guidance Wednesday to $5.70 to $6.70 a share, up from $5.40 to $6.40 a share.

GM said adjusted automotive free cash flow for the year is now expected at about $1 billion, down from $1 billion to $2 billion. The decline is due to spending to finish vehicles that were previously built without chips.

For the quarter, strong vehicle pricing as well as income of about $1.1 billion from its financial arm boosted GM's results. GM Financial's earnings through the first three quarters were $3.9 billion, up 132% from a year earlier.

"Our third-quarter 2021 results clearly illustrate the strength of the underlying business that is funding our future, especially when you put them in the context of the calendar year," GM CEO and Chair Mary Barra said Wednesday in a letter to shareholders.

The automaker expects strong vehicle pricing to continue "well into" next year, Barra said Wednesday on CNBC's "Squawk Box."

On an unadjusted basis, net income was $2.4 billion for the third quarter compared with $4 billion a year earlier, when dealerships and plants largely reopened after being shuttered during some of the second quarter due to the coronavirus pandemic. The automaker reported pretax adjusted earnings of $2.9 billion for the third quarter, down from $5.3 billion a year earlier.

Third-quarter earnings also benefited from a deal with LG Electronics that would offset $1.9 billion of $2.0 billion in estimated costs of a recall of Chevrolet Bolt EVs due to fire risks. LG produced defective batteries for the vehicles at plants in South Korea and Michigan.

GM's revenue in the third quarter plummeted by about 25% compared to $35.5 billion a year earlier, as it continued to manage through the semiconductor chip shortage.

Chip shortage

Barra during a call Wednesday said the automaker's supply of semiconductor chips is improving, but "It still continues to be somewhat volatile." She said GM expects the shortage to continue into the first half of next year.

"We are seeing some improvement in fourth quarter; we expect to see some additional improvement in Q1," she told reporters during a call Wednesday morning. "Although we think the first half of next year, we'll still see impact from the semiconductor shortage. We think it will get better toward the end of the year."

GM previously warned investors that its North American wholesale volumes would be down by about 200,000 units in the second half of 2021 compared with the first half, due to the parts problem.

GM said third-quarter chip supplies were down largely due to the spread of the Covid-19 delta variant in Southeast Asia, specifically Malaysia, according to Barra. Earlier this month, GM said the semiconductor chip situation 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. However, two remain down for retooling and some are operating on fewer shifts.

– CNBC's Michael Bloom contributed to this report.

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