Morningstar

GM Earnings: Price and Warranty Costs Drive Another Guidance Hike

We’ve raised our fair value estimate of GM stock.

The General Motors Company (GM) logo is seen displayed on a smartphone screen.
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Securities in This Article
General Motors Co
(GM)

Key Morningstar Metrics for General Motors

  • Fair Value Estimate
    : $86.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : High

What We Thought of General Motors’ Earnings

General Motors GM stock rose over 5% in July 21 trading as second-quarter adjusted diluted earnings per share grew 41.3% year over year to $3.57, beating the $3.20 LSEG consensus. GM also raised its 2026 guidance for the second time this year, with adjusted diluted EPS now at $12-$14 from $11.50-$13.50.

Why it matters: We were concerned that GM would have a mix headwind this quarter, given its retail channel SUV sales, but adjusted EBIT rose 29.8% to $3.9 billion. Pricing contributed $700 million of the increase, while lower warranty and other costs contributed another $300 million.

  • The second half of 2026 will not be as strong as the first, given downtime to launch the new-generation full-size pickup trucks in the fourth quarter, but GM did say it expects 2027 to be better than 2026 on higher truck volume, more SUV production, lucrative software revenue, and buybacks.
  • The higher guidance assumes no further major inflation pressure from commodities or the Iran war, so there is some risk to the forecast. But we see GM doing a great job on what it can control, which is making high-demand products while controlling costs and incentives.

The bottom line: We are raising our fair value estimate to $86 per share from $83 for no-moat GM on time value of money and improved 2026 guidance. We see GM in strong form, provided that the US economy continues to avoid recession.

  • GM’s incentives as a percentage of MSRP in the quarter were 160 basis points lower than the industry. The software business, which for OnStar has gross margins of about 70%, continues to scale, and GM Defense and insurance are growing, meaning that upside is possibly not properly priced in.
  • Share repurchases in the quarter totaled $2.0 billion, bringing the first-half total to $2.8 billion for 36 million shares, almost 4% of January’s shares outstanding. About $3.5 billion of authorization remains, which we expect to be used up in the next two to three quarters.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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