General Motors (GM) Will Likely Make Up Lost Production by Year End, Barclays FY Estimates Largely Unchanged After Preannouncement

Barclays analyst Brian Johnson reiterated an Overweight rating and $52.00 price target on General Motors (NYSE: GM) despite management disclosing, last Friday, plans to hold ~95k vehicles manufactured missing certain components in company inventory until they are completed. Despite this headwind, the analyst left FY’22 forecasts largely intact on the belief that the company can sell the impacted vehicles throughout 2H’22, essentially, catching up.

The analyst stated "We cut our 2Q EPS to $1.25 from $1.60 ($1.62 consensus) on Friday’s news that GM plans to hold ~95k units manufactured without certain components in company inventory until they are completed (due to supply constraints) and will recognize revenue when they are sold to dealers, which is expected to occur throughout 2H’22. We cut our 2Q North American adj. EBIT and now see it falling ~$1bn Q/Q to $2.2bn (8.7% margin), which is below current sell-side consensus of ~$3.1bn (10.0% margin) and our prior estimate of $2.8bn (9.8% margin). Upside to our estimate could come from a) cuts to discretionary spending as GM came into the year planning to spend ~$2bn in ‘22 to expand software development and further accelerate its EV portfolio including ~$0.5bn in Corporate for BrightDrop), b) stronger-than-expected pricing (though pricing data as of midJune is tracking largely in-line with our expectations coming out of 1Q earnings), and c) commodities pricing, which has come down in 2Q (we estimate raw mats input prices ran ~$3,300 for the average vehicle in 2Q vs ~$3,775 in 1Q). We also lower our FCF estimate for 2Q given the inventory build (~95k vehicles held in inventory at ~$50k implies ~$4.75bn of inventory build); we now estimate free cash outflow of $2.9bn in the quarter vs our prior expectation of a $1.7bn free cash inflow."

For an analyst ratings summary and ratings history on General Motors click here. For more ratings news on General Motors click here.

Shares of General Motors closed at $32.19 yesterday.

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