Shares of General Motors (GM) are down 3.6% in pre-market trading at the time of writing, as the automaker warned of bigger impacts from tariffs in the future. For the second quarter of fiscal 2025, GM beat both top and bottom-line expectations and reaffirmed its FY25 guidance. The company had warned in May that it would add $4 billion to $5 billion in annual costs due to tariffs on the import of vehicles, auto parts, and aluminum and steel.
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GM reported adjusted earnings per share (EPS) of $2.53, easily exceeding the consensus estimate of $2.44. Similarly, revenue of $47.12 billion beat the consensus of $46.28 billion. For reference, GM reported adjusted EPS of $3.06 on revenue of $47.97 billion in the prior year quarter. The latest figures represent a 17% decline in adjusted EPS and a 1.8% fall in revenue, compared to Q2FY24.
Tariffs Take a Big Bite Out of GM’s Earnings
The legacy automaker’s net income was impacted by a $1.1 billion tariff charge, despite GM’s implementation of a few “mitigation” efforts, including manufacturing more vehicles in the U.S. Due to this charge, GM’s net income declined 35% year-over-year to $1.9 billion.
GM warned that the second half of the year will see a bigger tariff impact since it will include two quarters of tariff exposure. Meanwhile, the company confirmed that it is on track to reduce at least 30% of the expected cost increases from tariffs through various measures. These include manufacturing adjustments, targeted cost-saving measures, and consistent pricing.
GM Is Shifting Production to the U.S.
GM is shifting parts of its production to the U.S., with a $4 billion investment in its manufacturing plants over the next two years. The investment will ramp up production at GM’s facilities in Michigan, Kansas, and Tennessee. CEO Mary Barra stated that the investment will help the company “satisfy unmet customer demand, greatly reduce our tariff exposure, and capture upside opportunities as we launch new models.”
Barra also noted that GM is leading the industry in full-size trucks and SUVs, and growing its electric vehicle (EV) business, with Q2 EV sales up 111% year-over-year. Meanwhile, its performance in China was strong in Q2, supported by the launch of new energy vehicles.
Is GM Stock a Buy, Hold, or Sell?
On TipRanks, General Motors stock has a Moderate Buy consensus rating based on 13 Buys, six Holds, and two Sell ratings. Also, the average General Motors price target of $55.66 implies 4.6% upside potential from current levels. GM stock has gained 7.4% in the past year.
Please note that these ratings were issued before the Q2 print and are subject to change once analysts revise their recommendations.
