Although General Motors Company (GM) Report Indicated Recovery in 2Q 2021, Investors Spooked by Rapidly Shrinking Global Sales

General Motors’ earnings report is now viewed by many investors as pivotal in determining whether U.S. consumers feel more confident while abandoning frugality mode and being ready to buy new cars. But there is something beyond that as well. Besides, as we all know, GM is one of the largest automakers in the world with the headquarters located in Detroit. Production facilities are established in 35 countries, while sales are carried out in 192 countries. The company is a shareholder of a large number of automotive enterprises (Fiat, Isuzu, Subaru, Suzuki). Numerous company’s divisions partner with the following brands: Baojun, Buick, Cadillac, Chevrolet, Daewoo, GMC, Holden, Isuzu, Opel, and others. Auditor: Deloitte & Touche.

Key indicators of yesterday’s earnings report:

GM posted consolidated revenue of $34.2 billion (vs. $16.8 billion in Q2 2020) beating consensus by $4.54 billion on the net income of $ 2.8 billion and Adjusted EBIT of $ 4.1 billion (for the same period in 2020, net loss was $ (0.8) billion, and Adjusted EBIT loss of $ (0.5) billion). Net profit margin recovered to 8.3% and adjusted EBIT margin rose to 12%. (for the same period in 2020, net margin loss was minus (4.5) percent and adjusted EBIT margin loss was (3.2) percent). Diluted earnings per share of US $1.90 and adjusted diluted earnings per share of US $ 1.97 (for the same period of 2020 diluted earnings per share of US $ (0.56) beat consensus by $0.42, while adjusted diluted earnings per share of USD (0.50)) also came in slightly above expectations.

Operating cash flow for the automotive division was $4 billion, while its adjusted free cash flow rose to $2.5 billion (for the same period in 2020, operating cash flow was negative at ($8.0) billion, while the adjusted free cash flow was minus ($9.0) billion.

In respect to the geographical distribution of GM profits, adjusted EBIT of GM North America brought in $2.9 billion on an adjusted EBIT margin of 10.4%, while adjusted EBIT of GM International was near zero, including revenue from operations in China of just $0.3 billion. Apparently what worries GM’s international investors and fans the most is that the automaker keeps rapidly losing its global market share.

The company confirmed its FY 2021 guidance as follows: diluted annualized earnings per share in the range of $5.12 to $6.12 and adjusted diluted earnings per share of $5.40 to $6.40.

The full 2021 forecast is as follows: net income for the year is expected at $7.7 billion to $9.2 billion, while adjusted EBIT will be from $11.5 billion to $13.5 billion.

The bottom line is that despite the overall presence of sound signs of the post-Covid sales recovery domestically and the fact that the company has improved its financial forecasts for the full year of 2021, international markets remain virtually closed for GM vehicles, which, as we mentioned, reiterates concerns about the automaker’s ability to retain the size of its market niche. Shares of GM plunged at the time of its conference call despite the earlier solid growth, leading to their closing bell price decline of nearly 9%. Despite today in the premarket GM shares are somewhat recovering to the tune of 1%, the fact that overall sentiment remains low is hard to deny.