Popular automaker General Motors Company (GM), known for its Buick, Cadillac, Chevrolet, and GMC brands, announced strong fiscal third-quarter results. The company’s earnings beat the consensus estimate by 19.6%. Despite growing significantly year-over-year, sales came in marginally lower than analysts estimated.

The company’s total worldwide market share in the third quarter ended September 30, 2022, came in at 7.7%, compared to 6.9% in the year-ago period. Its total worldwide vehicle sales increased 17.1% year-over-year to 1.53 million.

Despite the uncertain macroeconomic environment, GM maintained its previous guidance. It expects the strong business momentum to continue. For fiscal 2022, the company expects its net income to come between $9.60 billion and $11.20 billion, while its adjusted EBIT is expected to come between $13 billion and $15 billion.

In addition, the adjusted EPS for the year is expected between $6.50 and $7.50. Moreover, GM expects its net automotive cash from operating activities to come between $16 billion and $19 billion. Its adjusted automotive free cash flow is expected between $7 billion and $9 billion.

The company has set an ambitious target to double revenue to $275 billion to $315 billion by 2030 and expects margin expansion to 12% to 14% within that time frame, with new businesses driving margins over 20%.

The stock has jumped 17.2% over the past month, with its third-quarter results boosting investor sentiment. However, the stock is down 32.8% in price year-to-date and 32.7% over the past year to close the last trading session at $39.39.

Here’s what could influence GM’s performance in the upcoming months:

Robust Financials

GM’s total net sales increased 56.4% year-over-year to $41.88 billion for the third quarter ended September 30, 2022. Its adjusted EBIT increased 46.7% year-over-year to $4.28 billion. Its adjusted EPS came in at $2.25, representing an increase of 48% year-over-year. 

In addition, its net income attributable increased 38% year-over-year to $3.27 billion. For nine months ended September 30, 2022, GM’s net cash from operating activities increased 24.3% year-over-year to $10.41 billion.

Mixed Analyst Estimates

Analysts expect GM’s EPS for fiscal 2022 to increase 0.9% year-over-year to $7.13. Its EPS for fiscal 2023 is expected to decline 14.9% year-over-year to $6.07. Its revenue for fiscal 2022 and 2023 is expected to increase 21.3% and 4% year-over-year to $154 billion and $160.16 billion, respectively.

Discounted Valuation

In terms of forward non-GAAP P/E, GM's 5.52x is 57% lower than the 12.86x industry average. Its forward P/S of 0.36x is 56.3% lower than the 0.83x industry average. Also, the stock's 5.78x trailing-12-month EV/EBITDA is 33.3% lower than the 8.66x industry average.

Mixed Profitability

In terms of the trailing-12-month gross profit margin, GM’s 13.56% is 62.4% lower than the 36.08% industry average. Its 3.71% trailing-12-month return on total assets is 21.5% lower than the 4.73% industry average.

On the other hand, its 10.94% trailing-12-month Capex/Sales is 263.6% higher than the industry average of 3.01%. In addition, its 6.57% trailing-12-month net income margin is 25.3% higher than the industry average of 5.25% industry average.

POWR Ratings Show Promise

GM has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GM has a B grade for Value, consistent with its discounted valuation.

GM is ranked #16 out of 63 stocks in the Auto & Vehicle Manufacturers industry. Click here to access GM’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.

Bottom Line

At a time when inflation and high raw material prices are hurting consumers and manufacturers, GM maintained its guidance for fiscal 2022, indicating strong demand for its offerings. The stock is also trading at a discount to its peers.

Given its strong product portfolio, robust financials, and solid growth prospects, it could be wise to buy the stock now.

How Does General Motors Company (GM) Stack up Against Its Peers?

GM has an overall POWR Rating of B, equating to a Buy rating. You might want to consider investing in the following Auto & Vehicle Manufacturers stocks with an A (Strong Buy) or B (Buy) rating: Subaru Corporation (FUJHY), Stellantis N.V. (STLA), and PACCAR Inc (PCAR).

GM shares rose $0.13 (+0.33%) in premarket trading Tuesday. Year-to-date, GM has declined -32.66%, versus a -19.08% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

More...