Key Points
- General Motors share value could be better but steady growth is good.
- Consistent EPS shows steady value growth.
- General Motors continues to outperform most of the automotive industry.
After a couple of tough years, the auto industry may be ready to emerge from the COVID-19 wasteland. Stock analysts offering price targets on General Motors (NYSE: GM) have given a consensus rating of "moderate buy."
GM's current value stock value is $35.80, which is near the low of the 52-week range ($30.33 to $67.21), but hope may blossom in the coming months.
Share Value Sluggish but Has Momentum
General Motors peaked at $65.74 on January 4, 2022 but has failed to meet the price target since April 2021. The most recent low was $32.55 in early July. This was not only the lowest value for the stock in more than a year, but it is also the largest gap between actual price and consensus estimate; it was $60.17 in January.
While the current share price is down, three out of four analysts think General Motors is a "buy." This makes sense when you consider that the consensus price target for the next reporting date is $55.28, within the range of $29 to $90.
Overall, this forecast has an upside of 54.41% from the last price target of $35.80. On top of that, the stock value itself has a 68% upside and a nearly 261% upside against the rest of the auto, tire and truck industry. It is also a 32% upside against the whole of the S&P 500.
Earnings Per Share Show Persistent Growth
The current earnings per share (EPS) is $1.94 on $42 billion in sales. The hope is that these numbers will grow by October 25, the next reporting date.
Growing numbers could be in the cards as earnings have steadily improved the past several quarters. In Q3 of 2021, for example, analysts estimated an EPS range of $0.30 to $1.70 with a conservative consensus estimate of $0.98. GM celebrated actual earnings of $1.52. Q4 was more of the same, with the $1.35 reported earnings coming in well above the consensus estimate of $1.16 and comfortable within the $0.63 to $1.49 range.
In the first quarter of 2022, GM performed even better. The $2.09 reported EPS for the top of the year beat not only the consensus estimate but also the top of the range ($1.94). Q2 was not as impressive, as the reported earnings of $1.14 failed to beat the consensus estimate and only barely topped the low end of the range ($1.12).
Annually, earnings reflect much of the same, with 2019 the only year in the recent past to fail to meet the consensus estimate. In 2021, however, the reported EPS of $7.07 nearly beat the entire range. While they do not expect EPS to be quite so substantial for 2022 and 2023, the estimate should sit comfortably in the range.
General Motors Outperforms Despite Broad Market Struggles
Although supply chain issues have plagued the entire automotive industry for the last year or two, demand for new vehicles is up. At least, this is true for General Motors, which recently said that despite the Fed's fourth consecutive interest rate hikes (with another potentially on the way) vehicle sales in the U.S. grew by 24% in the third quarter alone.
Specifically, the automaker reported the sale of 555,580 cars and light trucks in the most recent quarter, which ended on September 30. This is surprising growth that suggests better consumer outlook, as GM sold only about 447,000 of the same model class during the same three-month period one year ago. Of course, that was also a time when key component production was mostly restricted by tighter regulations in Asia.
Other automakers have also experienced mixed results. Some did see increases, though not as substantial. For example, Volkswagen (OTCMKTS: VWAGY) has reported its sales are only up about 12% in Q3, though it is certainly better than the declines the company saw in the first half of the fiscal year. Ford Motors (NYSE: F) also reported sales up 16% in Q3, even with a slow September.
On the other hand Toyota Motor Corporation (NYSE: TM) reported that sales are down 7% for the quarter at just a little more than 526,000 in spite of a 17% September surge.
A fair number of automakers feel confident that not only will demand return soon, the demand will also remain quite firm, with a chance that demand could even outpace supply.
For these reasons and more, analysts' "buy" ratings are certainly warranted.
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