On Tuesday, RBC Capital Markets maintained its Outperform rating and $58.00 price target for General Motors (NYSE:GM) stock, following the carmaker's announcement of a new $6 billion share repurchase authorization. General Motors revealed today that its board has approved the new buyback plan, which follows a $10 billion accelerated share repurchase announced in November 2023.
The company still had $1.4 billion left from its previous program and has repurchased $300 million in shares in the first quarter of 2024. General Motors anticipates completing the remaining $1.1 billion of its prior plan before the end of the second quarter of 2024.
General Motors has demonstrated a strong commitment to returning capital to shareholders, with a total of $2.5 billion in share repurchases in 2022, $11.1 billion in 2023, and an expected additional $1.4 billion in the first half of 2024. This totals a cumulative $15 billion in just two and a half years.
Dividend payments have also contributed to the return of capital, with $300 million in 2022, $500 million in 2023, and a planned $300 million in the first half of 2024, amounting to a cumulative $1.1 billion over the same period. Together, buybacks and dividends represent a $16.1 billion total return to shareholders, which is 30% of the company's market capitalization.
The new share repurchase authorization is seen as a sign of General Motors' confidence in its near-term prospects, despite concerns over high dealer inventories and pricing across the auto industry.
According to RBC's proprietary data, General Motors has the best dealer inventory position among the Detroit Big Three automakers in the United States, remaining below pre-pandemic levels. The company's strong performance is attributed in part to significant revenues from only four models, which account for 45% of year-to-date dealer revenues.
RBC's analysis suggests that the strategy employed by General Motors could have positive implications for other original equipment manufacturers (OEMs) with similar capital return policies.
Stellantis (NYSE:STLA), for example, is expected to return €7.7 billion to shareholders in 2024, including €3 billion in buybacks and €4.7 billion in dividends. While Stellantis has the highest dealer inventory levels among the Detroit Three, new product launches in the second half of the year are anticipated to help reduce these inventories.
The aggressive capital return strategies of companies like General Motors and Stellantis are beginning to create a performance gap between them and other automakers who are less aggressive or unable to return capital at similar levels. This divergence in strategy is starting to be reflected in share price performance, as noted by RBC Capital Markets.
In other recent news, General Motors (GM) has announced a new stock buyback program, planning to repurchase $6 billion of its outstanding shares. This move follows a $10 billion accelerated share repurchase program initiated in November 2023 and a 33% dividend increase earlier in the year.
The company's CFO, Paul Jacobson, emphasized GM's commitment to shareholder value, underpinned by consistent revenue growth and profitability from both its internal combustion engine and electric vehicle operations.
In other developments, the National Highway Traffic Safety Administration (NHTSA) has revised fuel economy standards, leading to significantly reduced penalties for automakers, including GM.
The new rules aim for an average of 50.4 miles per gallon by 2031, a significant decrease from the previously projected $14 billion in industry fines. For GM, this translates to an estimated $906 million in penalties, down from the initially proposed $6.5 billion.
GM's CEO, Mary Barra, recently expressed the company's commitment to the development of autonomous vehicle technology, emphasizing its potential for enhancing road safety by reducing human error.
Meanwhile, GM Defense, a subsidiary of GM, has partnered with Mistral Inc. to integrate advanced loitering munition technology into its light tactical utility vehicle. These are among the recent developments as GM continues to innovate and return value to its shareholders.
InvestingPro Insights
General Motors' recent moves to enhance shareholder value through share repurchases have been complemented by its financial metrics and market performance. According to real-time data from InvestingPro, GM's market capitalization stands at $54.25 billion, with a notably low P/E ratio of 5.85, which drops even further to 5.08 when adjusted for the last twelve months as of Q1 2024. The company's revenue growth remains robust, with an 8.79% increase over the last twelve months and a 7.58% quarterly rise as of Q1 2024. These figures align with the company's aggressive buyback plan, signaling a confidence in its financial stability and growth prospects.
InvestingPro Tips highlight that GM is not only trading at a low earnings multiple but also implies a strong free cash flow yield, which could be appealing to value investors. The company's valuation and performance metrics, such as a 20.66% return over the last three months and a 42.46% price increase over the last six months, underscore its recent market success. Additionally, with GM trading near its 52-week high and analysts predicting profitability this year, the company's stock could be attractive for those looking for investment opportunities in the Automobiles industry.
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