General Motors ended the year 2024 with a bang, as it reported a fourth-quarter profit of $2.5billion, exceeding Wall Street’s expectations. However, GM stock dropped by over 10%, due to tariff concerns that overshadowed the positive guidance.
GM sold nearly 190,000. It was just short of the 200,000 unit goal.
The automaker expects a better future in 2025 with operating profits between $13.7 and $15.7 billion, as well as adjusted earnings per share (EPS) ranging from $11 to 12.
This represents an increase of nearly 10% in earnings per share from 2024. Cost management, improved EV profitability and a $16 billion aggressive stock-buyback program are all contributing factors.
GM stock fell by over 10% after the announcement of earnings and by 9.43% by 1pm.
The stock of GM had risen by 44% over the last year before Tuesday’s move.
Fears of tariffs overshadow strong advice
GM’s performance and future outlook are impressive. However, the stock price decline reflects growing concerns about policy changes.
GM’s guidance for 2025 does not take into account possible tariffs or tax reforms that President Donald Trump may implement, nor any regulatory changes.
Trump threatens to impose 25% tariffs on imported goods from Canada and Mexico.
Mike Ward, analyst at Freedom Capital Markets said that GM produced 300,000. Full-sized trucks in Mexico. Of these vehicles, 75% to 80% were exported to the US. Tariffs could make these vehicles more costly, reduce GM’s margins, or do both.
In a report published on Tuesday, Wolfe Research’s analyst Emmanuel Rosner wrote: “There are three large questions that remain unanswered regarding this outlook.”
The lack of clarity regarding tariffs and weaker than expected profit margins for North America, along with the fact that GM’s stock repurchase authority expired in 2024, are all examples of these issues.
GM said that it will also face headwinds by 2025, including increased labor costs as well as a price drop between 1% and 1.5% expected in North America.
Cash flow is expected to be robust
GM is committed to its EV plan despite the obstacles.
In 2025 the company expects to deliver 300,000 vehicles, an increase of 58% from 2024.
This projection is dependent on the continued existence of EV Tax Credits and other supporting policies. These may be changed under Trump’s administration.
GM expects a robust cash flow in its auto business, with a forecast of $21 billion to $25 billion.
This will allow for the purchase of additional shares.
The share repurchase programme of the automaker has played a major role in its stock performance. GM’s shares are expected to rise by nearly half (50%) between now and 2024. They will be second only behind Tesla, among global automakers.
GM faces increased competition on the EV Market
While GM is navigating tariff uncertainty, the EV competition has intensified.
Tesla is the leader in electric vehicles, with 1.8 million sold by 2024.
Tesla stock soared by 66% in the last year. This was largely due to investor enthusiasm over self-driving and AI initiatives, rather than sales of traditional vehicles.
Tesla’s new robo-taxi, which is set to be launched in 2025, could change the landscape of competition.
GM has yet to see the same impact from its plans for autonomous driving technology or other innovations.
The post Why did GM share prices fall 10% despite strong Q4 Results? This post may change as new information unfolds
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