BofA Securities analyst John Murphy reiterated the Buy rating on General Motors Company (NYSE:GM) with a price objective of $85.
The auto giant registered third-quarter adjusted EBIT for the quarter of $4.115 billion (+15.5%), with an adjusted EBIT margin of 8.4%, up by 30 bps.
The analyst notes an "increasing belief" that the company could see similar EBIT in 2025 compared to 2024.
This outlook hinges on the expectation that EBIT from the core ICE business may remain flat in 2025 while the company works towards its goal of improving its EV business by $2 billion – $4 billion.
Murphy writes that if achieved, this could result in a total EBIT of $16 billion – $17 billion for 2025.
Coupled with share buybacks, this might lead to 20% to 30% EPS growth. However, Murphy emphasizes that this is not the analyst's base case, which estimates a 10% EPS growth to $11.45.
Also Read: General Motors' Strong Q3 Earnings Impress Analysts, Highlights Turnaround And EV Profitability Focus
General Motors raised 2024 adjusted EPS guidance from $9.50 – $10.50 to $10.00 – $10.50 (consensus $10.00).
Murphy highlights that General Motors remains a leader in transitioning from core operations to future growth, with the potential for further expansion beyond 2024.
The analyst observed that GM North America's EBIT exceeded expectations, benefiting from a $400 million production pull forward and favorable pricing.
In contrast, GM International struggled due to ongoing challenges in China. GM Financial also performed better than anticipated.
Additionally, the analyst notes that spending on Cruise and Corporate was lower than expected.
Murphy notes that the company's liquidity is more than adequate to navigate macroeconomic volatility while continuing to invest for the future and return value to shareholders.
With strong free cash flow and a solid cash position, General Motors has the capacity to enhance shareholder returns, including through additional share buybacks.
Murphy raised FY24 EPS estimate to $10.42 from $9.65. For FY25, the analyst raised the estimate to $11.45 from $10.25.
Price Action: GM shares are trading lower by 1.3% to $53.03 at last check Wednesday.
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