GM's Q2 Did Not Deserve the Stock Sell-Off It Triggered
We are leaving our fair value estimate in place because we see GM’s aggressive investment in an electric and autonomous future as more important than 2021 results.
We said in our June 16 note that we saw risk that the market may be disappointed by GM’s second half 2021 guidance and that has occurred with GM’s second quarter results. We are leaving our fair value estimate in place because, as we said on June 16, we see GM’s aggressive investment in an electric and autonomous future as more important than 2021 results. Second quarter adjusted EPS of $1.97 missed the Refinitiv consensus of $2.23 but we think the market found GM’s increased 2021 guidance to be well below expectations. Still, we don’t believe GM’s stock deserved to fall by 9% during Aug. 4 trading. New adjusted diluted EPS guidance is $5.40-$6.40 (versus Refinitiv consensus of $7.39) and up from $4.50-$5.25. We had been modeling $6.52 but now model $6.32. Total company adjusted EBIT is now guided at $11.5 billion to $13.5 billion, up from $10 billion to $11 billion and automotive adjusted free cash flow remains guided at $1 billion to $2 billion ($546 million in the first half).
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David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.