General Motors shares declined despite reported higher revenue! 🚗

General Motors (GM.US) shares are falling 3.3% after the company reported Q2 earnings. Tuesday's report revealed that despite a surge in revenue and per-vehicle transaction prices, the automaker is grappling with mounting costs and challenges in ramping up production of electric vehicles. This has resulted in a decrease in adjusted pre-tax profit and margins in its vital North American market from the first quarter.

In an effort to mitigate these issues, the company intends to decrease its investment in new products and trim its operating costs by an extra $1 billion by the end of the following year. Despite these challenges, the automaker has raised its full-year profit forecast.

Despite today's negative reaction to the report, GM raised its 2023 targets:

• Projecting EBIT to fall between $12 billion and $14 billion. This exceeds previous guidance, which capped at $13 billion.
• EPS forecast for the full year to between $7.15 and $8.15, up from a maximum of $7.35 per share previously predicted.
• Net income outlook for 2023 to between $9.3 billion and $10.7 billion, compared to earlier guidance ranging from $8.4 billion to $9.9 billion.

CEO Mary Barra attributes these optimistic revisions to reductions in capital spending and asserts that the guidance assumes no labor strikes in the current year.

Key points:

• EPS: In the latest quarter, the EPS was $1.91, surpassing the consensus estimate of $1.86.

• Quarterly Revenue: GM's revenue for the latest quarter was $44.8 billion, exceeding the analyst expectations of $42.8 billion and showing an increase from $35.8 billion a year ago.

• Operating Profit: The company's North American business unit reported a 39% increase in operating profit to $3.2 billion.

• Profit in China: After losing $87 million a year ago, the company turned profitable in China, reporting a profit of $78 million in the latest quarter.

• Loss from Cruise Division: Cruise, GM's self-driving car unit, reported a loss of $611 million in the quarter, bringing the total loss for this year to $1.2 billion.

Peers analysis

In the chart above, we see the estimated revenues and EBITDA for General Motors and five competitor companies. Even though GM's results exceeded expectations, it can be seen that analysts forecast a smaller increase in both revenues and EBITDA in the next year compared to the results for the last 12 months (LTM). However, these values will probably be revised slightly after today's results.

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