General Motors announced Wednesday plans to woo investors with an increased dividend and an "accelerated" share buyback while also restoring guidance following a long labor strike and pared electric vehicle goals.
GM stock surged Wednesday.
General Motors said Wednesday it will increase its quarterly stock dividend by 33% to 12 cents and that will begin an accelerated $10 billion share repurchase program. GM also reinstated 2023 guidance, which includes an estimated $1.1 billion earnings before interest and tax (EBIT-adjusted) impact from lost production during the around 2-month United Auto Workers (UAW) strike.
GM had twice raised full-year earnings guidance in 2023 before withdrawing it in the third quarter due to the labor strike.
"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," GM Chief Executive Mary Barra said in a statement Wednesday.
Barra added on a call Wednesday with investors that GM estimates the new union contracts will increase labor costs in North America by about $500 per vehicle in 2024 and by about $575 on average over the life of the contracts.
GM Stock
GM stock surged 9.4% to 31.59 Wednesday during market action, after leading the S&P 500 in early morning trade. General Motors has gained 2.5% in November and is down 14% on the year. Shares jumped above the 50-day line but remain below the 200-day.
Ford stock also rallied 2% Tuesday.
Chrysler and Fiat parent Stellantis leapt 5%, signaling a move out of a buy zone.
GM Revives 2023 Guidance
General Motors' new 2023 guidance includes EBIT-adjusted of $11.7 billion-$12.7 billion, compared to the previous outlook of $12.0 billion-$14.0 billion. GM is also now predicting earnings of $7.20-$7.70 per share vs the prior forecast of $7.15-$8.15 per share. That cuts the midpoint by 20 cents to $7.45. The automaker also expects adjusted automotive free cash flow of $10.5 billion-$11.5 billion, up from its earlier view of $7.0 billion-$9.0 billion.
The company also now anticipates 2023 capital spending to be $11 billion-$11.5 billion, which is toward the lower end of its prior guidance of $11 billion-$12 billion.
Warren Buffett's Berkshire Hathaway unloaded all of its 22 million shares in GM in the third quarter. That position was valued at $848.3 million on June 30. GM stock was the worst yearly performer among all the stocks Berkshire Hathaway sold off completely in the period.
Analysts expect General Motors, struggling to compete in electric vehicles, to post 1.6% lower profit in 2023 and 12% less in 2024 compared to 2022 levels.
GM stock ranks tenth in the 35-stock IBD automaker industry group. The S&P 500 component has a 58 Composite Rating out of a best-possible 99. GM stock also has a 19 Relative Strength Rating and a 79 EPS Rating.
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