Key Takeaways
- General Motors shares fell 5% today after the company beat third-quarter estimates and announced a new $20 billion buyback.
- GM kept the midpoints of its full-year profit outlook where they were, so analysts have no reason to raise their estimates, and a buyback can’t make up for that.
- GM’s diluted share count fell by about a third from fiscal 2021 to fiscal 2025, but its forward P/E is still right at its five-year average of 5.8x.
- The next test is GM’s 2027 outlook, which management says depends on demand holding up and costs easing.
General Motors (GM) beat Wall Street’s third-quarter estimates this morning and announced a new $20 billion buyback. The stock is down 5% anyway.
The reason is the outlook. GM narrowed its full-year profit ranges but kept the same midpoints. So investors got a beat for the quarter and nothing extra for the year. (Shares had gained 46% in a year going into the report, so expectations were high.)
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What GM reported
On its own, the quarter was strong:
- Revenue of $50.0 billion, up 2.9% and above the $48.52 billion Bloomberg consensus.
- Adjusted EPS of $3.70, against $3.57 expected.
- Net income of $3.3 billion, up 151%. Most of that jump came because special charges, including EV production changes, hurt the same quarter last year.
- U.S. deliveries down 5.5% to about 671,000 vehicles. Yahoo Finance counts EV sales down about 62%, while light-duty pickup sales rose 9.3%.
But the full-year outlook barely moved. GM now expects adjusted EBIT of $14.5 billion to $15.5 billion (previously $14 billion to $16 billion) and adjusted EPS of $12.75 to $13.75 (previously $12 to $14). Both midpoints, $15 billion and $13.25 billion, haven’t changed.
Rising costs help explain it. GM now expects about $2 billion of commodity inflation, the top of its earlier range, and that includes logistics and memory chip costs. It also lowered its expected regulatory benefits to about $500 million, down from as much as $750 million. CEO Mary Barra pointed to “growing inflationary pressures” in her letter to shareholders.
The Street gets no reason to raise numbers
Before the report, analysts already expected GM to earn $13.42 a share in 2026, slightly above the new midpoint, and $15.11 in 2027.
Keeping the midpoint gives analysts no reason to raise their 2026 number. The 2027 figure also comes with a condition from management: GM expects 2027 to beat 2026 as long as demand stays strong and commodity, logistics and other costs ease. Right now, costs are moving the wrong way.
The buyback only works if the multiple holds
That puts a lot of weight on the buyback. “We think this is a proven strategy,” Barra wrote. GM just finished its previous $6 billion program, and its diluted share count has already fallen by about a third since fiscal 2021.
In the third quarter alone, GM spent $2.5 billion to retire 29 million shares.
With fewer shares, each share earns more, even if total profit stays flat. But the market hasn’t rewarded GM for that. Its forward P/E was 5.8x before today, the same as its five-year average.
After today’s drop it’s closer to 5.5x.
What’s next
My take: today’s drop is a fair reaction. A buyback this big keeps per-share earnings rising. But the multiple has been stuck near 5.8x for years, so GM stock also needs profit growth. The outlook didn’t offer any beyond what analysts already expected.
The next test is the 2027 outlook, which should come with GM’s fourth-quarter results early next year. Before then, Ford (F) reports on Oct. 28. Its numbers will show whether the commodity and memory chip costs GM flagged are hitting the rest of Detroit too.
So what is GM stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
