General Motors (NYSE:GM) Reports Upbeat Q2
Automotive manufacturer General Motors (NYSE:GM) reported Q2 CY2024 results topping analysts' expectations , with revenue up 7.2% year on year to $47.97 billion. It made a non-GAAP profit of $3.06 per share, improving from its profit of $1.89 per share in the same quarter last year.
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General Motors (GM) Q2 CY2024 Highlights:
Revenue: $47.97 billion vs analyst estimates of $45.32 billion (5.8% beat)
EPS (non-GAAP): $3.06 vs analyst estimates of $2.70 (13.4% beat)
Raised full year guidance for EPS (non-GAAP)
Free Cash Flow was -$4.55 billion, down from $369 million in the previous quarter
Market Capitalization: $56.52 billion
Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.
Automobile Manufacturers
Much capital investment and technical know-how are needed to manufacture functional, safe, and aesthetically pleasing automobiles for the mass market. Barriers to entry are therefore high, and auto manufacturers with economies of scale can boast strong economic moats. However, this doesn’t insulate them from new entrants, as electric vehicles (EVs) have entered the market and are upending it. This has forced established manufacturers to not only contend with emerging EV-first competitors but also decide how much they want to invest in these disruptive technologies, which will likely cannibalize their legacy offerings.
Sales Growth
Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Unfortunately, General Motors's 4.2% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. General Motors's annualized revenue growth of 16.1% over the last two years is above its five-year trend, suggesting its demand recently accelerated. General Motors recent history stands out, especially when considering many similar Automobile Manufacturers businesses faced declining sales because of cyclical headwinds.
This quarter, General Motors reported solid year-on-year revenue growth of 7.2%, and its $47.97 billion of revenue outperformed Wall Street's estimates by 5.8%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
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Operating Margin
Read More Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
General Motors was profitable over the last five years but held back by its large expense base. It demonstrated paltry profitability for an industrials business, producing an average operating margin of 6.1%. This isn't too surprising given its low gross margin as a starting point.
On the bright side, General Motors's annual operating margin rose by 5.5 percentage points over the last five years.
In Q2, General Motors generated an operating profit margin of 8.1%, up 1.8 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.
EPS
Read MoreAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
General Motors's EPS grew at an unimpressive 7.9% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 4.2% annualized revenue growth and tells us the company became more profitable as it expanded.
Diving into the nuances of General Motors's earnings can give us a better understanding of its performance. As we mentioned earlier, General Motors's operating margin expanded by 5.5 percentage points over the last five years. On top of that, its share count shrank by 20.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For General Motors, its two-year annual EPS growth of 30.5% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, General Motors reported EPS at $3.06, up from $1.89 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects General Motors to grow its earnings. Analysts are projecting its EPS of $9.15 in the last year to climb by 4.9% to $9.59.
Key Takeaways from General Motors's Q2 Results
We were impressed by how significantly General Motors blew past analysts' revenue expectations this quarter. We were also glad its full-year EPS guidance was raised and exceeded Wall Street's estimates. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock traded up 3.9% to $51.50 immediately following the results.
General Motors may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.