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BofA affirms General Motors' improved outlook, keeps stock buy-rated

Published 2024-06-12, 07:58 a/m
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On Tuesday, BofA Securities maintained a Buy rating on General Motors (NYSE:GM) with a steady price target of $75.00. The affirmation came after GM's Executive Vice President and Chief Financial Officer, Paul Jacobson, spoke at a conference on Monday.

Jacobson provided updates on the company's performance and outlook, indicating that second-quarter earnings are expected to surpass those of the first quarter. This projection aligns with BofA's model, which anticipates adjusted EBIT for the second quarter to be slightly higher at $3.93 billion compared to $3.87 billion in the first quarter.

Jacobson's commentary suggests the potential for even better financial outcomes than predicted. Additionally, he touched upon General Motors' electric vehicle (EV) production forecast for 2024, now expecting to produce between 200,000 to 250,000 EVs. This figure represents the lower end of the previously estimated range of 200,000 to 300,000 vehicles. Despite this revision, GM remains confident in its ability to achieve positive variable profit within the current year.

In a separate announcement, General Motors revealed plans to invest $850 million in cash into its autonomous vehicle subsidiary, Cruise. This move underlines the company's commitment to advancing its position in the autonomous vehicle space and its overall investment in future mobility solutions.

The update from GM's CFO and the investment into Cruise comes as the auto industry continues to navigate the transition to electric and autonomous vehicles, with General Motors positioning itself as a key player in this evolving market. The company's outlook and strategic investments reflect its ongoing efforts to adapt and lead in a rapidly changing automotive landscape.

In other recent news, General Motors (GM) has announced a new $6 billion share repurchase program. This follows a $10 billion accelerated share repurchase initiated in November 2023 and a 33% dividend increase earlier this year. 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.

Citi maintains a Buy rating on GM stock, reiterating a $96.00 price target, while RBC (TSX:RY) Capital Markets maintained its Outperform rating.

These recent developments come amidst GM's robust revenue growth, solid margins, and strong free cash flow. The company is also making progress in the electric vehicle sector, with improvements in both growth and profitability. GM Defense, a subsidiary of GM, has partnered with Mistral Inc. to integrate advanced loitering munition technology into its light tactical utility vehicle.

Concerning regulatory news, 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.

InvestingPro Insights

As General Motors (NYSE:GM) continues to make headlines with its strategic investments and optimistic production forecasts, real-time data from InvestingPro provides additional context for investors considering the stock. With a market capitalization of $54.98 billion and a notably low P/E ratio of 5.95, GM appears to offer value in terms of earnings. The P/E ratio is even more attractive when adjusted for the last twelve months as of Q1 2024, sitting at 5.14, suggesting that the stock may be undervalued relative to its earnings potential.

InvestingPro Tips indicate that GM's management has been actively buying back shares, a sign of confidence in the company's value proposition. Additionally, GM is not just a prominent player in the Automobiles industry but is also trading at a low earnings multiple, which could appeal to value-oriented investors. These factors, combined with a strong return over the last three months, underscore the company's robust performance in the recent past.

For those seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/GM. And for a limited time, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more expert insights to guide their investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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