$General Motors (GM.US)$ Announced the third-quarter financial performance. The third-quarter report exceeded analyst expectations due to stable sales of rbob gasoline engine trucks and SUVs, as well as the company's focus on inventory reduction. Q3 adjusted earnings per share (EPS) were $2.96, surpassing analysts' estimates of $2.43. Revenue was $48.8 billion, a year-on-year increase of 10.5%, exceeding Wall Street's expected $44.6 billion. At the same time, General Motors also raised its full-year profit guidance, surpassing analysts' expectations.
At the beginning of the year, General Motors estimated pre-tax profit for this year to be $12 billion to $14 billion, and mid-year raised guidance to $13 billion to $15 billion, boosted by strong pricing and consumer spending. On Tuesday, the company further stated that it is expected to achieve pre-tax profit of $14 billion to $15 billion this year. General Motors also raised the full-year adjusted EPS guidance to $10 to $10.5 (previously $9.5 to $10.5), above analysts' consensus expectation of $9.97.
The auto manufacturer has exceeded Wall Street's earnings per share expectations for nine consecutive quarters and revenue expectations for eight consecutive quarters. General Motors' third-quarter performance benefited from continued strong pricing, offsetting losses in the Chinese market, along with a year-on-year increase of $0.2 billion in labor costs and $700 million in warranty costs.
The company's North American business almost constitutes its main source of income, with adjusted EBIT of nearly $4 billion (total $4.12 billion), up 12.9% from the same period last year. The adjusted profit margin is 9.7%. General Motors' performance in North America contrasts with a $0.137 billion loss in China. General Motors is attempting to restructure its business in China, with adjusted profits in other international markets down 88.2% from the same period last year, to $42 million.
General Motors Chief Financial Officer Paul Jacobson stated that from July to September, the average transaction price per vehicle remained above $0.049 million. Wall Street has been closely monitoring whether there are signs of weakness in this indicator. General Motors set the annual profit target at the higher end of the previous guidance, while Jacobson played down concerns about consumer demand; he told reporters, "Consumers are behaving very well for us." He added that rate cuts next year will further improve demand.
General Motors CEO Mary Barra has been focused on delivering stable messages, earlier this month she stated that the company expects next year's profits to be similar to this year, easing concerns of investors who worry about declining profits in the automotive industry. General Motors has indicated that pricing may soften next year, but cost reductions in SUVs and electric vehicles, as well as improvements in the Chinese market, are expected to support performance.
Investors remain concerned that historically high interest rates and economic worries will impact consumers, dampening new car sales, despite most of the year new car sales showing resilience. Shareholders are also uneasy about the losses from electric vehicles by auto manufacturers, as General Motors' Chinese competitors overseas are launching affordable electric vehicles in large numbers, while Tesla (TSLA.US) continues to dominate electric vehicle sales in the USA. Company executives state that although Chinese auto manufacturers have not yet entered the US market, large auto manufacturers like General Motors see the threat from low-cost and high-tech vehicles.
General Motors' profit driver is traditional gasoline-powered vehicles, including 8 new gasoline SUV models set to be launched by the end of 2025, attracting many customers who are not yet ready for electric vehicles. With increased production of models like the Silverado electric truck and Equinox electric SUV, the quarterly sales of electric vehicles have been increasing this year. However, as of the third quarter, electric vehicles only account for about 4% of the company's total deliveries in the USA.
Investors also hope for clearer plans from General Motors' self-driving Cruise division. Since an autonomous taxi was involved in a safety incident last year, the division has been under close scrutiny. The division recorded an operational loss of $0.4 billion in the third quarter, lower than the $0.7 billion loss in the same period last year. At a General Motors investor day earlier this month, Barra stated that by 2025, the division's losses will not exceed $2 billion.
