GM Earnings: Tariff Uncertainty Punishes Stock Despite Strong 2025 Guidance

Key Morningstar Metrics for General Motors

• Fair Value Estimate: $78.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of General Motors’ Earnings

General Motors GM finished 2024 with a good quarter, with adjusted diluted earnings per share of $1.92 up 54.8% year over year beating the LSEG $1.89 consensus. The company introduced 2025 guidance of adjusted diluted EPS of $11-$12, which is slightly above the $10.85 consensus figure, and 2025 adjusted EBIT guided at $13.7 billion to $15.7 billion, versus $14.9 billion reported for 2024, is also robust, in our view. However, guidance assumes no impact of any policy changes, such as for electric vehicle tax credits or possible 25% tariffs starting Feb. 1 levied by President Donald Trump.

We think the tariff uncertainty, as well as GM not announcing an increase to its share repurchase program, drove the stock down over 10% during Jan. 28 trading. We are not changing our fair value estimate, but we will reassess all valuation inputs after rolling our model forward a year for the 10-K.

We think the stock falling so much is a market overreaction. Trump threatened tariffs on all American imports from Mexico and Canada starting Feb. 1 on his first day in office, so this element was not new on Jan. 28. On the company’s earnings call, management said they would not allocate new capital without certainty on policy, and certainty is impossible at this point because the duration of any tariffs against Mexico and Canada cannot be modeled with anything close to precision.

Trump has tied the tariff threat to action on immigration and drugs, so any tariffs could be short-lived if each country makes a deal satisfactory to Trump. GM has high tariff exposure due to Mexican pickup and crossover production and Canadian pickup production. We estimate that about half of GM’s full-size pickup production is in Mexico and Canada, with 35% from Mexico. The firm said it has expedited some produced units into the United States to avoid tariffs, and that some Mexican or Canadian capacity can be moved to existing US plants. Still, we don’t see how GM can avoid most of the impact, should tariffs come.