What investors need to know for Tuesday’s fourth quarter earnings

General Motors CEO Mary Barra speaks at the General Motors Factory ZERO electric car assembly plant on November 17, 2021 in Detroit, Michigan.

Nick Antaya | Getty Images

DETROIT – General Motors is expected to report a relatively positive fourth-quarter profit after markets close on Tuesday, uncovering an unusual year of supply chain problems that will persist into 2022.

Wall Street analysts estimate that the Detroit automaker will invest $ 1.19 per share in adjusted earnings and $ 34 billion in revenue, according to Refinitiv estimates. That revenue would be lower by 9.3% compared to a year earlier, largely due to limited production caused by a persistent global shortage of semiconductor chips.

GM’s fourth-quarter adjusted EPS is expected to be its lowest of the year, down from $ 1.93 from the fourth quarter of 2020.

While investors will be checking GM’s quarterly results, they are more interested in the automaker’s guidance for this year, as well as insights into outside factors that could affect the company in 2022.

Here’s more about those issues and other things investors need to know about ahead of GM’s fourth-quarter results after the markets close Tuesday.

Accompaniment

Wall Street is awaiting the company’s 2022 guidance. Due to the shortage of semiconductor chips, inflation and other external factors, analysts expect that this year will be a bumpy, but promising, one for the auto industry.

Revenue for the last four years “will take a backseat to 2022 guidance”, which we expect to be at or below current expectations to start the year, said Joseph Spak, analyst at RBC Capital Markets in a note from investors. “Position will go out as we get closer, but in general, lower guidance can be a distraction event for the road to playing cars for volume recovery.”

GM CFO Paul Jacobson told investors at a Credit Suisse conference in December that the company expects “another strong year” in 2022.

Wall Street analysts expect GM and other automakers to be conservative in their earnings guidance this year, and continue with a 2021 trend.

Analysts estimate that GM will earn $ 6.93 per share in 2022, according to average estimates compiled by FactSet. That compares with expectations of $ 6.83 in 2021, including $ 5.67 per share through the first three quarters of 2021.

Q4 revenue

In December, Jacobson said fourth-quarter results were stronger than expected and increased GM’s adjusted earnings forecast for the year to about $ 14 billion, up from guidance that had already been increased once to a range of $ 11.5 billion to $ 13.5 billion.

The new guidance satisfied investors and Wall Street analysts who were disappointed when executives said the company would perform at the “high end” of its guidance range when it announced third-quarter results in October.

GM’s initial adjusted earnings guidance for the year was between $ 10 billion and $ 11 billion, as it sought to predict the impact of the continuing shortage of semiconductor chips.

GM reported an adjusted tax profit of $ 3.7 billion for the fourth quarter of 2020. Revenue was $ 37.5 billion in that quarter.

Chips

In increasing the automaker’s guidance, Jacobson called for solid car prices, increased consumer demand and an improved supply of semiconductor chips. However, he said that GM does not expect its inventory levels of cars to reach a normalized amount by 2022.

“We expect to see the first quarter likely to be similar to the fourth quarter and then begin to stabilize and improve in the second half of 2022 and that’s the way we think about our budgets and our plans in advance,” Jacobson said. .

The problem with parts caused GM’s annual sales of new cars in the United States last year to drop by 12.9% to 2.2 million.

Jacobson said GM hopes to reach a “normalized run rate” for car production by the end of 2022, followed by more normal inventory levels.

External factors

Inflation, higher interest rates and other external factors, such as commodity costs, are expected to continue to affect the global auto industry by 2022. Investors will want to know more about how these topics are expected to affect GM’s business this year.

“In our view, the single biggest risk to our volume forecasts is that the broader economic environment and consumer health / confidence remain highly uncertain,” BofA safety analyst John Murphy said in a recent investor note.

GM chief economist Elaine Buckberg called inflation “the biggest cloud on the horizon” for the economy during an event last month, according to the Detroit Free Press.

Buckberg also said the automaker expects a modest increase in interest rates this year as the Federal Reserve normalizes policy.

After GM’s shares rose 40% in 2021, they fell 10% in January. The stock closed Monday at $ 52.73 a share, up 5%.

, CNBC’s Michael Bloom contributed to this report.


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