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WallStWhiz
WallStWhizUnraveling market complexities one story at a time. Reporting on finance with integrity and insight.
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.
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:
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.
Total Score
Strengths
Earnings are forecast to grow
Trading below its fair value
Upgraded on attractively valued
Analysts raised price target
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.
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The Score performance whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained.
The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The Readiness Indicators, Sentiment Indicators and total score are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Active trading is generally not appropriate for someone of limited resources, limited invesment or trading experience, or low-risk tolerance. Your capital may be at risk.
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