General Motors (GM) -) shares powered higher Wednesday after the carmaker updated its profit guidance following the United Autoworkers Union strike while unveiling plans to boost its quarterly dividend and buyback $10 billion in stock.
General Motors said the six-week UAW strike, which ended late last month, would clip around $1.1 billion from the group's bottom line, but would ultimately improve free cash flows thanks in part to strike-related shutdowns at various facilities around the country.
GM said it now sees full-year adjusted profits in the region of $11.7 billion to $12.7 billion, down from its prior forecast of $12 billion to $14 billion. Diluted earnings, GM said, would likely come in between $7.20 and $7.70 per share, compared to its prior range of between $7.15 and $8.15 per share.
The carmaker also said it would boost its quarterly dividend by 33%, to 12 cents per share, starting in 2024 while immediately retiring $6.8 billion in GM stock through its new $10 billion buyback.
GM's free cash flow forecast was lifted to between $10.5 billion and $11.5 billion, a $2.5 billion boost from the higher end of it pre-strike forecast.
"GM will deliver very strong profits in 2023 thanks to an exceptional portfolio of vehicles that customers love and our operating discipline," CEO Mary Barra said in a statement.
"We are finalizing a 2024 budget that will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing includes reducing the capital intensity of the business, developing products even more efficiently, and further reducing our fixed and variable costs," she added. "With this clear path forward, and our strong balance sheet, we will return significant capital to shareholders."
General Motors shares were marked 9.3% higher in early Wednesday trading to change hands at $31.57 each, a move that would leave the stock down around 5.4% over the past six months.
GM has been working to cut costs and improve efficiencies since the summer, and accelerated those plans after settling its dispute with the UAW last month and agreeing to boost salaried workers' pay by around 25% over the next five years.
The overall cost increase over that period, GM said, will be around $9.3 billion.
Earlier this month, GM said it would not advertise during the 2024 Super Bowl, marking its first absence from the world's biggest annual sporting event since 2019, following what it called an evaluation of media strategies "to ensure they align with our business priorities."
"Ultimately, while not the most ideal situation for the company amidst the largest EV transformation for a company seen this decade, we believe GM has now taken back the reins on this situation with a clear vision forward and remain confident in the company’s trajectory heading into FY24 with profitability and EV production the two largest focuses looking forward," said Wedbush analyst Dan Ives, who carries an 'outperform' rating with a $46 price target on GM stock.
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