GM Shares Plunge 7% After Company Misses Estimates But Boosts Full Year Outlook

GM Shares Plunge 7% After Company Misses Estimates But Boosts Full Year Outlook

Shares of General Motors and Ford are both lower this morning – GM by about 8% and F by about 3% – after GM reported mixed earnings and Ford updated on sales of its Mustang Mach-E.

General Motors missed analyst expectations for Q2 even after reporting a record operating profit and raising its guidance for the year. The company reported adjusted EPS of $1.97 vs. estimates of $2.23 and revenue of $34.17 billion vs. estimates of $30.9 billion. Shares plunged about 7% at the open.

GM suffered in Q2 from $1.3 billion in recall costs, most of which were associated with the Chevy Bolt. Last month, the company announced that two Bolts had caught fire without impact recently and that at least one of the two was related to the battery and happened despite the owner getting a fix from a previous recall, according to the Detroit Free Press. Ergo, GM recalled the vehicle due to the fire risk, which included all Bolt EVs from 2017 to 2019, encompassing 68,000 vehicles. 50,925 of those vehicles were located in the U.S. and they had batteries that were produced at LG Chem’s Ochang, South Korea, facility.

Despite this, GM raised its expectations for the full year to $5.40 to $6.40 per share, up from $4.50 to $5.25 per share. The company continues to deal with challenges associated with the global semiconductor shortage, which has prompted factory shutdowns and is expected to cost GM billions in 2021 earnings.

GM CFO Paul Jacobson said: “The chips really represent a little bit more of a lost opportunity of what could have been even better, but the year is actually progressing quite well and I think we’ve overcome all of those initial expectations to exceed what we what we thought we could do at the beginning of the year.”

GM CEO Mary Barra told CNBC: “Everyone has been demonstrating remarkable resiliency and adaptability in this rapidly changing environment.”

Back in June, GM had said it found “creative ways to satisfy customers”. Phil Kienle, GM vice president, North America Manufacturing and Labor Relations said mid-summer: “Customer demand continues to be very strong, and GM’s engineering, supply chain and manufacturing teams have done a remarkable job maximizing production of high-demand and capacity-constrained vehicles.”

The automaker said it is working on developing long-term solutions to its supply issues, and says it is officially “focused on advancing an all-electric future that is inclusive and accessible to all”. 

Ford shares also fell at the open about 2.75%, partly in sync with GM’s move lower. The company said on Wednesday morning that its Mustang Mach-E sales were up 15.8% in July, making it the second largest growth in the electric SUV segment, Bloomberg reported. The company said it was seeing an expanding competitive conquest rate as a result of sales of its F-150 hybrid, Bronco and Mach-E. 

The company reported on July 29 and posted a strong quarter, in addition to raised guidance. 

Ford CEO Jim Farley said the company was seeing signs of improvement with the semiconductor shortage: “In April, we said we’d expect to lose about 50% of our planned volume in the second quarter, which then implied a loss in adjusted EBIT. In fact, we did better than expected. We leveraged the strong demand to optimize our revenue and profits. We’re seeing signs of improvement in the flow of chips now in the third quarter, but the situation remains fluid, especially due to the delay in ramp up of one of our key suppliers, Renesas, that Ford is uniquely exposed to in the first half. Overall, after effectively managing through the first half, we are now spring-loaded for growth in the second half and beyond because of those red-hot products, pent-up demand, and improving chip supply.”

Recall back in June we noted that Ford’s U.S. sales were up 4.1% to 161,725 units in May, while YTD sales were up 11.3%. EV sales for May were up 184% to 10,364 units. The company also sold 1,945 Mustang Mach-Es and 3,617 electrified Escapes. 

Tyler Durden
Wed, 08/04/2021 – 10:23

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