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General Motors: A Stellar Turnaround Story in 2024

 
  • user  WallStWhiz
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    WallStWhiz  WallStWhiz
     
      
     
     
     

    Unraveling market complexities one story at a time. Reporting on finance with integrity and insight.

     
 
 
 

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Key Highlights

 
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GM operating profit is projected to rise to $13.5 billion in 2024, up from $12.4 billion in 2023.
 
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GM announced $16 billion in share buybacks, boosting investor confidence and stock value.
 
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GM shares surged 31% YTD, outperforming the S&P 500 by 16 percentage points.
 
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GM outperformed major US auto stocks, which saw an average decline of 23%.
 

General Motors Remarkable Resurgence in 2024

 

First off, General Motors: A Stellar Turnaround Story in 2024 is no exaggeration. This company has left its US competitors in the dust. While everyone else seemed to be struggling, GM pulled off a 31% increase in their stock price year to date, beating the S&P 500 by a solid 16 percentage points. What’s behind this impressive performance? Let’s break it down.

 

A big part of GM's success this year comes down to improved earnings. Wall Street now expects their operating profit to hit $13.5 billion in 2024, up from $12.4 billion in 2023. That’s a significant jump, and it’s no surprise that investors are feeling pretty good about it.

 

In their latest quarterly report, GM didn’t just meet expectations—they blew them out of the water. Earnings per share (EPS) came in at $2.62, much higher than the expected $2.12. Their operating profit for the quarter was $3.9 billion on sales of $43 billion, surpassing forecasts of $3.1 billion in profit on $42.1 billion in revenue. This strong performance set a positive tone for the rest of the year, leading GM to raise their full-year forecast.

 

But earnings alone don’t tell the whole story. Another major factor in General Motors' stellar turnaround story in 2024 is their aggressive share buyback strategy. Back in November, GM announced a $10 billion share buyback program. Then, they added another $6 billion to that earlier this week, bringing the total to $16 billion—about 50% of GM's market value at the time.

 

Now, I know some folks debate the effectiveness of buybacks, especially for large companies with slower growth. But this one’s too big to ignore. GM’s CFO, Paul Jacobson, pointed out that these buybacks are funded by earnings, not debt. This means GM is maintaining its financial health while also returning capital to shareholders, which has been a huge confidence booster for investors.

 

When you look at the broader auto industry, General Motors' stellar turnaround story in 2024 becomes even more impressive. While GM shares have surged by 31%, other major US auto stocks have struggled. Tesla shares are down 28%, Ford’s down 4%, and suppliers like Aptiv and Magna have seen declines of 20% and 29%, respectively. On average, US auto stocks are down 23% this year, making GM’s performance stand out even more.

 

The auto industry has faced significant challenges in 2024, including high-interest rates, declining vehicle prices, and slower EV sales growth. EV sales grew only 3% year-over-year in the first quarter, a stark contrast to the 46% growth we saw in 2023. Despite these headwinds, GM has managed to thrive, thanks to their strategic initiatives and capital management.

 

Capital management has played a pivotal role in General Motors' stellar turnaround story in 2024. By consistently returning capital to shareholders through buybacks and dividends, GM has strengthened investor confidence and showcased the company’s financial stability. Paul Jacobson noted that their goal is to make the market understand the consistency of GM’s performance, which he hopes will lead to a higher earnings multiple and a higher stock price in the future.

 

This approach highlights an important lesson for us investors: large-scale buybacks relative to a company's market value can significantly impact share prices. It’s worth paying attention to companies that announce substantial buyback programs, as these can be strong indicators of management’s confidence in their future prospects.

 

Future Outlook and Investment Implications

 

Looking ahead, GM’s management has set an optimistic forecast for 2024, expecting an operating profit between $12.5 billion and $14.5 billion. This range is higher than their previous forecast of $12 billion to $14 billion, with the midpoint now at $13.5 billion. This improved outlook, coupled with strong first-quarter results, suggests that GM is well-positioned for continued growth and profitability.

 

So, what does this mean for us as investors? Here are a few takeaways from General Motors: A Stellar Turnaround Story in 2024:

 
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Strong Financial Management: GM’s strategic use of capital, particularly through share buybacks, has significantly enhanced shareholder value and positioned the company for long-term growth.
 
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Resilient Business Strategy: Despite industry challenges, GM’s innovative product lineup and effective EV strategy have enabled it to outperform its peers.
 
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Positive Market Sentiment: The company’s consistent financial performance and optimistic future outlook have bolstered investor confidence, making GM an attractive investment option in the auto sector.
 

In conclusion, General Motors stellar turnaround story in 2024 is a compelling example of how strategic capital management and innovative business strategies can drive significant shareholder value. If you’re looking for opportunities in the auto sector, GM’s strong performance and positive outlook are definitely worth considering.

 

Happy investing!

 
 

GM Stock Analysis

 
Last Price
Change
 
49.01
+2.25%

 

Total Score

 
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2.92
 
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 Earnings are forecast to grow

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 Trading below its fair value

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 Investors confidence is positive

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 Outperform the market

 

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 Enters Overbought Territory

 
 

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