General Motors (GM) is set to announce its third-quarter results on Tuesday morning. While investors are eager to hear about the financial performance of the company, they are particularly interested in what management has to say about labor, costs, and interest rates, as these factors could significantly impact the company's stock.
Market analysts are anticipating an operating profit of $3.3 billion and earnings per share of $1.87 from sales totaling $42.5 billion for the third quarter. Comparatively, in the same period of 2022, GM reported an operating profit of $4.3 billion and earnings per share of $2.25 from sales amounting to $41.9 billion.
Focus on Labor Strife
However, despite the financial figures, investors have more pressing concerns on their minds. One major issue is the ongoing strike by the United Auto Workers (UAW), which commenced on September 15th. Currently, around 9,300 GM workers, representing approximately 20% of the automaker's UAW workforce, are on strike.
GM recently released details of an offer it made to the UAW leadership in hopes of resolving the strike. The proposed offer includes cumulative wage increases of 25% over a span of four years. Importantly, these wage increases come with inflation protection. Additionally, there are improvements being offered to retirement benefits, opportunities for workers to progress to higher pay grades, profit-sharing arrangements, and enhanced time off policies.
Investors will be closely watching to see how the labor situation unfolds and how management addresses these concerns during the earnings report. While positive results and optimistic guidance would undoubtedly be welcome, the outcome of the UAW strike will likely have a significant impact on market sentiment towards GM.
UAW Strikes Continue to Weigh on GM Stock
Investors Awaiting CEO Mary Barra's Insight
UAW President Shawn Fain responded to recent union negotiations, suggesting that the union would be seeking further concessions from General Motors (GM). As investors eagerly await more clarity on the ongoing strike, they will have the opportunity to hear directly from CEO Mary Barra during a conference call scheduled for Tuesday at 8:30 a.m. Eastern time.
GM stock has been heavily impacted by the strike, seeing a decline of approximately 24% since the beginning of July. In comparison, the S&P 500 has only experienced a 5% decrease during the same period.
It is important to note that while the strike has contributed to GM's losses, other factors such as the overall state of the economy have also played a significant role. With higher interest rates making car purchases more expensive, many buyers rely on financing options. Tesla CEO Elon Musk recently expressed concern over the impact of these interest rates on electric vehicle (EV) pricing and demand during the company's second-quarter conference call. Consequently, Tesla has been forced to lower prices in order to mitigate the effects of high interest rates, which has negatively affected its profitability. In fact, Tesla's second-quarter operating profit margins dropped by almost 10 percentage points year over year, settling at less than 8%.
Following Tesla's earnings report, which resulted in a more than 9% decline in its stock, interest rates have come under scrutiny for all automotive investors. As such, one of the key focal points for investors in GM will be its outlook on interest rates and how the company plans to compete with Tesla's now-lower-priced EVs.