GM CFO: We are still all in on EVs

Brian Sozzi

General Motors (GM) finally sees a road to profitability for its electric vehicles.

Whether they hit that mark in 2024 is, well, as they say in texts: TBD.

GM CFO Paul Jacobson told Yahoo Finance Live on Tuesday the company continues to be committed to an electric future, despite headwinds such as range anxiety and cost of ownership. He sees "variable" EV profitability being achieved in the second half of 2024.

Fully-accounted profit is anticipated in 2025.

Several factors will fuel EV profitability, Jacobson says, including lower commodities costs and improved manufacturing execution, particularly around battery cells.

The commentary follows better-than-expected fourth quarter earnings from GM.

Investors will now have more to assess GM on with the surprising callout to EV profits. Recall GM isn't too far removed from a 2023 where it battled product delays, weak EV demand, and issues with its autonomous driving Cruise operation.

"I would be shocked if they hit EV profitability this year," CFRA analyst Garrett Nelson said on Yahoo Finance Live. Jacobson says he understands Wall Street's skepticism.

GM shares finished the session 7.8% higher.

2024 Chevrolet Silverado EV Work Truck is seen in Scio Township, Michigan, U.S. June 22, 2023. REUTERS/Paul Lienert
2024 Chevrolet Silverado EV is seen in Scio Township, Mich., June 22, 2023. (Paul Lienert/REUTERS) (REUTERS / Reuters)

Some on Wall Street continue to give the company the benefit of the doubt, however. The GM bulls cite catalysts such as a massive new $10 billion stock buyback and the likelihood for better manufacturing execution this year.

GM's valuation is also compelling, many analysts argue — shares trade on a forward P/E multiple of 4.6 times, according to Yahoo Finance data. Tesla (TSLA) trades at 57.8 times forward earnings, while the broader S&P 500 is at about 22 times.

"On valuation, GM shares trade only in line with its historical trading range, despite the company being structurally more profitable and less levered than it has been in decades," JP Morgan analyst Ryan Brinkman wrote in a client note reviewed by Yahoo Finance.

"On catalysts, we see capital allocation as the primary catalyst that is likely to lead to a re-rating in the shares as we expect investors to stop ascribing a discount to GM’s cash balance as visibility on use of excess cash to enhance shareholder return increases."

Here's how GM performed relative to consensus expectations.

The earnings rundown

  • Net sales beat estimates: -0.3% year over year to $43 billion vs. estimate of $39.53 billion

  • Adjusted operating profits miss estimates: $1.8 billion vs. $1.87 billion estimate

  • Adjusted operating margins miss estimates: 4.1% vs. estimate for 4.4%

  • EPS beat estimates: $1.24 vs. estimate of $1.16

What else caught our attention: Big outlook, big share repurchases, big cost cuts

  • Adjusted EPS guidance above consensus: $8.50 to $9.50 vs. $7.70 estimate

  • Corralling Cruise costs: $1 billion in cost cuts related to the Cruise driverless car business

  • Road to EV profits: Projected "variable" profits in EV business in the second half of 2024

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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