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General Motors’ Q2 Numbers Could Take a Hit; Here’s Why

Story Highlights

General Motors reported lower sales in the second quarter on a year-over-year basis. Nevertheless, management remains optimistic about the long-term prospects.

The current global scenario has been overwrought with a number of uncertainties such as supply-chain imbalance, rising inflation, the Russia-Ukraine conflict, and labor challenges, among others. The majority of the sectors are bearing the brunt of turbulent markets, including the auto sector, which is not immune. 

The chip shortage and major supply constraints have roiled the auto industry to a large extent. Also, pricing pressure had been continuously squeezing profit margins, adding fuel to the fire. These problems are anticipated to have an impact on the automakers’ June quarterly sales figures.

General Motors Company (NYSE: GM) is one such corporation that issued a warning that delayed semiconductor shipments and supply chain concerns could hurt second-quarter results.

With a market capitalization of $46.94 billion, General Motors is one of the world’s largest vehicle manufacturers.

Earnings Expectations 

For Q2 2022, General Motors predicts net income between $1.6 billion and $1.9 billion, below analysts’ expectations of $2.46 billion.  

Nevertheless, on the expected relief from supply disruptions, the company reiterated its outlook for 2022. General Motors expects net income in the range of $9.6 billion to $11.2 billion, compared with the consensus estimate of $10.24 billion.  

Per the SEC filings, the company said, “We had a total of approximately 95 thousand vehicles in our inventory that were manufactured without certain components as of June 30, 2022, a majority of which were built in June. We expect that substantially all of these vehicles will be completed and sold to dealers before the end of 2022.” 

Second-Quarter Update 

During the second quarter of 2022, General Motors sold 582,401 vehicles in the United States, which was down 15% year-over-year. Remarkably, the company’s market share improved to 16.3% in the quarter. 

With increased retail market share in full-size pickup trucks for the 13th straight quarter, despite very low inventory, the company recorded combined sales of 203,041 Chevrolet Silverado and GMC Sierra. 

The company’s vehicle production was robust during the quarter, reflecting 247,839 vehicles in dealer inventory at the end of June. These include units in transit to dealers. 

Encouragingly, EVP at GM North America, Steve Carlisle, commented, “GM’s sales and market share have grown each of the last three quarters, even with lingering supply chain disruptions. Our long-term momentum will continue to build thanks to the launches of groundbreaking new EVs like the GMC HUMMER EV and Cadillac LYRIQ, and the tremendous customer response to the Chevrolet Silverado and GMC Sierra.” 

Website Traffic Indicates a Quarterly Downtrend 

With the help of TipRanks’ Website Traffic Tool, we can visualize how the company might have performed in Q2. This new tool measures and analyzes a company’s website visits over a particular period of time. 

The website traffic tool indicated a downtrend. In Q2 2022, total visits on GM websites showed a decreasing trend, on a global basis, representing an 8.24% decline from the prior-year quarter and a 25.5% drop on a sequential basis. 

This, in turn, indicated that the company might report weak results in the second quarter. 

Wall Street’s Take 

Recently, Barclays analyst Brian Johnson reiterated a Buy rating and a price target of $52 (61.54% upside potential) on General Motors. 

Johnson writes, “We see GM shares coming under pressure today (and into 2Q EPS at July 26) as the supply constraints GM cited impacting wholesale volumes in 2Q was a surprise to the markets.”

Overall, the stock has a Strong Buy consensus rating based on 13 Buys, two Holds, and one Sell. The average General Motors price target of $57.57 implies 78.84% upside potential. However, shares have plunged almost 44% over the past year. 

General Motors scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. 

Besides, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in General Motors is currently Positive, as the cumulative change in holdings across all 25 hedge funds that were active in the last quarter was an increase of 2.3 million shares. 

Ending Words 

According to General Motors, supply-chain problems and chip shortages may have a negative impact on its performance in the upcoming quarter. However, the corporation seems upbeat about the long-term prospects.

Also, vigilance on website trends reflected on TipRanks’ Website Traffic Tool could help in taking a prudent investment decision. 

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