General Motors raised its profit guidance for the 2019 calendar year after a surprisingly successful 2018, but some analysts don’t share the automaker’s positive outlook.
This past week, GM said it expected to post adjusted earnings per share of $6.50 to $7.00 in 2019. It also raised the $5.80 outlook given for its EPS for 2018 to $6.20 in October of last year, but gave no exact figure for total annual earnings.
The positive forecast caused GM stock to jump. GM opened at $36.67 on Friday and rallied to close at $37.18.
GM’s newly adjusted guidance is higher than market forecasts. With auto sales expected to slow in both the United States and China, where the bulk of its sales come from, Wall Street thinks GM will have a tough time meeting its own self set expectations. That includes Morgan Stanley analyst Adam Jonas, who believes the stock price will level back out over time.
“Not only did GM not choose to manage expectations lower in a highly uncertain macro climate, but in a major break from the industry they went the other way and raised guidance,” Jonas wrote, adding that he expects “to see more skeptical investors weigh in and fade the bounce, making GM a challenging story for long-only investors so late in the cycle.”
| Date | Open | Close | High | Low |
|---|---|---|---|---|
| 2019/1/11 | 36.67 | 37.18 | 37.97 | 36.25 |
| 2019/1/10 | 35 | 34.73 | 35.05 | 34.165 |
| 2019/1/9 | 34.96 | 35.18 | 35.59.34 | 71 |
| 2019/1/8 | 35 | 34.81 | 35.68 | 34.49 |
| 2019/1/7 | 33.71 | 34.36 | 34.956 | 33.48 |
Morgan Stanley also said the guidance was a surprise and they they still carried the “expectation of a potential significantly lowered guide,” for the Detroit-based automaker.
It’s not clear why GM raised its 2019 guidance, but Buckingham analyst Joseph Amaturo believes the stock will begin to fade as analysts start to examine the “underlying assumptions management used to derive their 2019 full year guidance.”
GM has been reaching for ways to boost its stock price in recent years, exiting money-losing markets like Europe and India, closing various plants across the globe, discontinuing slow-selling models and making general changes to prioritize profit over market share.
Recently, it has set about redirecting resources into the research and development of electric and autonomous vehicles to better set it up for the future.
(source: Bloomberg)
Comments
I am beginning to think that anything coming from Barra’s mouth is a falsehood. She appears to have every statement choreographed. Cost cutting can only go so far and the charade will be exposed and the stock collapse. Real value comes from bringing out “gotta have” products. Judging from the cheapening of the Silverado/Sierra, and the upcoming Blazer, GM has a long way to go.
Mary Barra is a fraud!
Great to see VW announcing it will build a US$800 million EV plant in the U.S. That’s right, NOT China or Mexico. The U.S. of A.
Funny how all the foreign brands see the U.S. as an important investment country but GM under Miss Mary Barra keeps making excuses and firing Americans. Yup, the same Americans who bailed out her company to the tune of $50 billion PLUS! Talk about stabbing the American taxpayer in the back.
VW, Toyota, Honda, Mercedes, Ford, BMW, and more all making HUGE investments in the U.S. now. NO MORE BS EXCUSES why you cant build vehicles in American profitability, unless you are just a complete idiot Mary and GM.
most of those investments are in right to work states so they don’t have to spend money to fight the unions over every little issue
Analysts doubtful of GM’s positive outlook for 2019.
FIRM ANALYST PRICE TARGET
Buckingham- Joseph Amaturo $34
Morgan Stanley- Adam Jonas $44
These analysts continue to provide insightful predictions regarding the auto business and how GM’s shares should be valued in the market. The problem here is that they continue to provide earnings guidance on GM, then GM earnings continue to far exceed those estimates. These two auto analysts are high profile in the auto sector they cover. They make their living on providing guidance to move these shares up or down, but they do not work inside GM. They get upset when the stock runs counter to their predictions, and they double down on more negative talk to influence GM’s share price.
When GM guides higher, management must have good reason to support their decision.
We may start to see the new full sized SUVs later this year, and this could be a key earnings catalyst.