GM forecasts earnings ‘at or near record levels’ in 2022 as chip shortage eases
General Motors said it expects to generate an operating profit this year of between $13 billion and $15 billion as a semiconductor shortage that marred vehicle production and sales for most of last year shows signs of improving.
The forecast, including adjusted earnings per share of between $6.25 and $7.25, is in line with many Wall Street analysts’ expectations as well as the company’s record $14.3 billion pretax adjusted earnings in 2021.
Net income this year is expected to be between $9.4 billion and $10.8 billion, also in line with its $10 billion profit in 2021, GM said.
“With an improving outlook for semiconductors in the U.S. and China, we expect our 2022 results will remain strong,” CEO Mary Barra wrote in a letter to shareholders, saying earnings will be “at or near record levels.”
General Motors Chairwoman and Chief Executive Officer Mary Barra speaks during a meeting hosted by U.S. President Joe Biden with private sector CEOs to discuss the Build Back Better agenda at the White House in Washington, U.S., January 26, 2022.
Kevin Lamarque | Reuters
Shares of the automaker jumped in after-hours trading by more than 2%. The stock closed Tuesday at $54.07 a share, up by 2.5%.
Barra said the company is not reinstating its dividend, which the automaker cut during the early days of the coronavirus pandemic in April 2020. She said the company plans to use the saved capital for accelerating, even increasing, its $35 billion in investments in electric and autonomous vehicles through 2025.
“As we move forward, we will consider all opportunities to return excess capital to shareholders, but we will not reinstate a dividend at this time,” Barra told analysts during a call Tuesday. “Our clear priority is to accelerate our EV plan and drive growth.”
The company plans to spend between about $9 billion and $10 billion a year in the medium term, including in 2022.
Q4 results
The guidance was announced as the Detroit automaker reported fourth-quarter earnings Tuesday that beat Wall Street’s expectations despite slightly missing on revenue.
Here’s how GM performed, compared with analysts’ estimates as compiled by Refinitiv:
- Adjusted EPS: $1.35 vs. $1.19 expected
- Revenue: $33.58 billion vs. $34.01 billion expected
For the fourth quarter, GM’s unadjusted net income was $1.7 billion. Its pretax adjusted earnings were more than $2.8 billion. That compares with an adjusted pretax profit of $3.7 billion in the fourth quarter of 2020. Revenue was $37.5 billion during that quarter.
GM’s North American operations contributed the most to the company’s profits in 2021. The market last year generated more than $10.3 billion, including $2.2 billion in the fourth quarter. The automaker’s financial arm followed the North American operations in generating more than $5 billion in 2021, including about $1.2 billion in the fourth quarter.
GM’s international operations earned only $827 million, including $275 million in the fourth quarter. The company last year spent about $1.2 billion on its majority-owned autonomous vehicle subsidiary Cruise.
After rising 40% in 2021, GM’s shares fell 10% in January. GM’s stock has a buy rating and a price target of $76.07 a share, according to average analysts’ estimates compiled by FactSet.
EVs
Barra said GM is in the process of accelerating its investments in the emerging EV segment, citing strong demand for its early next-generation vehicles.
“We are pulling ahead significant investment into the 2022-to-2025 time frame, and we will share more details as we further refine our plan,” Barra told analysts during a call Tuesday.
She said the company is planning to pull ahead an undisclosed amount of capital from the second half of the decade to increase its plans to invest $35 billion in electric and autonomous vehicles by 2025.
“We’re just going to keep going full-out,” she said.
Production is now set to begin at the former Detroit-Hamtramck assembly plant, less than two years after GM announced the massive $2.2 billion investment to fully renovate the facility to build a variety of all-electric trucks and SUVs.
Photo by Jeffrey Sauger for General Motors
Barra also confirmed the company will announce a third plant to produce battery-electric trucks in the foreseeable future as well as the location of a fourth production facility for battery cells with LG Energy Solution during the first half of this year.
GM last month announced plans to increase EV production capacity in North America to 1 million units by 2025, as the company aims to become America’s top seller of such vehicles through that time frame.
“What we’re doing here is essentially redeploying some of the upside earnings from the additional volume into acceleration and taking a longer-term view than just trying to maximize short-term profit,” GM Chief Financial Officer Paul Jacobson said during a conference call.
