By Nora Eckert
DETROIT (Reuters) -General Motors continued to defy Wall Street's expectations this year, posting third-quarter results ahead of analyst projections on the back of steady gasoline-engine truck and SUV sales and a focus on keeping inventories lean.
GM is targeting annual earnings at the top end of its previous forecast, and Chief Financial Officer Paul Jacobson brushed off economic concerns for customers.
"The consumer has held up remarkably well for us," he told reporters, adding that interest rate cuts would further improve demand next year.
GM started the year expecting to make $12 billion to $14 billion in pretax profit and raised the forecast in mid-year to $13 billion to $15 billion, buoyed by strong pricing and consumer spending. On Tuesday, it said it was on track to deliver between $14 billion and $15 billion in pretax profit.
The company's shares were up about 4% in pre-market trading Tuesday.
GM's adjusted earnings per share were $2.96 for the quarter, outpacing analysts’ forecast of $2.43 per share. Revenue for the three-month period was $48.8 billion, beating Wall Street’s expectation of $44.6 billion.
CEO Mary Barra has been focusing on a message of stability, saying earlier this month that the automaker's profit next year is expected to look similar to this year, a relief for investors who are worried about a potential decline in the auto industry's earnings. GM has said pricing could be softer next year but it expects results to be supported by cost cuts on SUVs and electric vehicles and improvement in China.
A weak spot in otherwise strong earnings was China, where operations regressed from a powerhouse to a loss of $210 million in the first half of this year. GM lost another $137 million in the region during the third quarter, and it is planning a restructuring of operations there.
"We really haven't instituted any of the real restructuring yet," Jacobson said, adding that sales in the region are up and inventory down.
Investor concerns persist that historically high interest rates and economic fears will catch up with consumers and dampen sales of new cars, despite the resilience seen for much of the year. Shareholders are also queasy about automakers’ EV losses as Chinese rivals pump out affordable electric vehicles abroad and Tesla (NASDAQ:TSLA) continues to dominate battery-powered vehicle sales in the United States.
While Chinese automakers have not yet penetrated the U.S. market, large automakers like GM see a threat from low-cost and high-tech vehicles, executives have said.
GM's stock is up 36% year-to-date, outpacing rivals Stellantis (NYSE:STLA) and Ford Motor (NYSE:F), whose share prices have both fallen over the same period. Ford has struggled with costly quality problems and Stellantis with decreasing sales and revenue in North America after it raised prices and held back on incentives.
INVESTORS SEEK CLARITY ON AUTONOMOUS CRUISE
GM's profit engine, traditional gas-powered vehicles, including eight refreshed gas SUV models through the end of 2025, is luring many customers who are not yet ready for EVs.
The company’s EV sales have increased every quarter of this year as it increases production of models including the Silverado EV truck and Equinox electric SUV.
Still, EVs accounted for only about 4% of the company’s total U.S. deliveries through the third quarter.
Investors are also hoping for more clarity around the plans for GM's autonomous Cruise unit, which has been under scrutiny since one of its robotaxis dragged a pedestrian last year. The unit recorded an operating loss of $400 million for the quarter, narrower than the $700 million loss in the prior-year period. At GM’s investor day earlier this month, Barra said the division would lose no more than $2 billion in 2025.