Commodity and logistics expenses outweighed higher third-quarter profit and revenue; automaker approves $20 billion multiyear buyback plan
By Kelly Cloonan
General Motors shares fell as mounting cost pressures overshadowed higher third-quarter profit and revenue.
A run-up in commodity and logistics costs due to the war in Iran has prompted the automaker to narrow its full-year outlook for adjusted earnings per share, following two consecutive raises.
"The path forward is more challenging," Chief Executive Mary Barra said during a call with analysts.
Shares slid 5.5% to $78.22 on Tuesday, on pace for their largest percent decrease in more than a year. The stock is now down 3.8% year to date.
GM on Tuesday also approved a new $20 billion multiyear share-repurchase plan to boost a stock price that executives view as undervalued.
During a call with analysts, executives cited growing pressure from record copper prices and elevated steel prices as the conflict in the Middle East drags on.
"There are clear external headwinds, and in some cases, they are intensifying," Barra said.
For the year, GM is projecting a $2 billion headwind from commodity inflation, logistics and memory DRAM costs. GM also expects an additional $1 billion to $1.5 billion in costs tied to software, supply-chain investments and U.S. production onshoring.
The company expects the pressures could continue to weigh on its performance heading into next year if commodity prices stay elevated, but it still expects to benefit from the launch of a new truck.
"Obviously, it's gotten a little bit more challenging with this additional inflation that we've seen," said Paul Jacobson, GM's finance chief. "But the goal remains to grow next year, as it does every year."
GM also expects continued softness in international markets, excluding China, reflecting the continuing dynamic environment in the Middle East, the company said.
GM now expects adjusted earnings per share of $12.75 to $13.75 for the full year, compared with its per-share outlook from July for $12 to $14. Analysts polled by FactSet had been looking for adjusted earnings of $13.47 a share.
The narrowed range comes after two consecutive bumps to the company's adjusted-earnings forecast, in April and July.
GM also narrowed other parts of its guidance. The company now projects earnings per share of $9.72 to $10.72 for the year, compared with $8.98 to $10.98 previously. It now expects full-year adjusted earnings before interest and taxes of between $14.5 billion and $15.5 billion, from a prior range of $14 billion to $16 billion.
The updated guidance came alongside higher third-quarter profit and revenue that topped Wall Street's estimates.
GM's third-quarter profit attributable to stockholders came in at $3.34 billion, or $3.73 a share, compared with $1.33 billion, or $1.35 a share, a year earlier.
Adjusted earnings per share were $3.70, compared with analyst estimates of $3.69, according to FactSet.
Revenue rose 2.9% to $50.02 billion, compared with analyst estimates of $48.78 billion.
Earlier this month, GM said it sold 5.5% fewer vehicles in the third quarter, with sales volume hurt by discontinued models and a diminished market for electric vehicles. Sluggish demand for some of its big sport-utility vehicles also dragged on demand as gas prices remain elevated. Some Americans are turning to smaller vehicles instead, with the company reporting higher sales for its small SUVs like the Chevrolet Trax and Trailblazer in the quarter.