General Motors’ (GM) hot stock has sprung a leak after its latest earnings report on Tuesday.
Shares of the auto giant fell as much as 11% on Tuesday and closed down 9%. It marked the worst day for the stock since March 2020. The stock shed another 1% through midday trading on Wednesday.
The stock had gained 50% in 2024 as GM moved quickly to slash billions in costs and repurchase stock. Results also consistently beat analyst estimates.
“Stock got hit hard on [Tuesday] for various reasons, but lack of new share buyback announcement loomed large,” explained BofA auto analyst John Murphy in a note to clients Wednesday.
GM repurchased more than $7 billion in stock in 2024 and more than $11 billion in 2023. Repurchases have played a key role in boosting GM’s profits by reducing shares outstanding and, by extension, supporting a higher stock price.
While Murphy believes the harsh market reaction was overdone, he listed a host of reasons why GM’s stock could stay in the penalty box for the near term.
“We heard a number of factors that appear to have unnerved the market: 1) Policy uncertainty with no change encompassed in the outlook — tariffs, IRA [Inflation Reduction Act] incentives, EPA/CARB ACC II; 2) Negative mix in the fourth quarter and concerns this will hit hard with more EVs in 2025, 3) Concern of price declines greater than outlook of -1% to -1.5%, 4) Flat volume outlook is disappointing; and 5) Lack of new buyback authorization (likely to be announced soon).”
Tariffs in particular hang over auto sector stocks and their valuations.
The auto industry is responsible for 26% of imports from Mexico to the US and 12% from Canada, UBS researchers estimated.
GM produces highly profitable pickup trucks in Mexico and relies on the country to make EVs such as the Chevy Blazer and Cadillac Optiq. It has five large assembly plants in the two countries.
Rival Ford (F) manufactures 12% of its products in Canada and Mexico.
“We’ve done a lot of scenario planning and we know the levers that we can pull to minimize any impact. But having the opportunity to talk to the president, I really believe he wants a strong manufacturing sector because it’s good for the economy,” GM chair and CEO Mary Barra told Yahoo Finance on Tuesday (video above).
GM said it assumes a “stable” policy environment, which, to Murphy’s point, may have unnerved investors witnessing anything but stable from the new Trump administration.
Moreover, GM’s full-year 2025 EPS guidance of $11 to $12 was ahead of consensus forecasts for $10.75 but doesn’t assume any impact of additional tariffs.
