General Motors Surges 5% on First Quarter Results

General Motors ( GM ), the Michigan-based automaker, exceeded Wall Street's predictions and raised its annual forecast in its first-quarter report, citing stable pricing and demand for its gas-engine vehicles. The company increased its adjusted pretax profit projection to $12.5 billion to $14.5 billion, from its previous range of $12 billion to $14 billion for the year.

GM's net income for the first quarter increased by 24.4% over the year-ago period to $3 billion, with the automaker reporting a 7.6% rise in revenue to $43 billion. Its adjusted earnings per share of $2.62 surpassed the average Wall Street target of $2.15, and revenue exceeded the Wall Street target of $41.9 billion in the March quarter.

Investors were pleased with strong vehicle pricing for gasoline-powered trucks, which continue to generate substantial profit and free cash flow, according to Tim Piechowski, portfolio manager at ACR Alpine Capital Research in St. Louis. Despite GM's struggles in China and with electric vehicles, its truck and SUV business remains strong.

GM's business in China, previously the automaker's largest market, has been declining, with Chinese automakers and Tesla gaining market share in the region through deep price cuts and refreshed technology offerings. GM lost $106 million in China in the quarter, which CFO Jacobson explained to reporters was less than expected, as the company worked through inventory.

GM's CEO, Mary Barra, faces two significant challenges ahead: turning around GM's shrinking sales in China and salvaging Cruise, its robotaxi unit. Cruise halted operations last year after one of its self-driving cars dragged a woman down a San Francisco street. Earlier this year, company officials announced that GM would cut spending on this unit by $1 billion. The robotaxi business lost $2.7 billion last year, not including $500 million in restructuring costs incurred in the fourth quarter as the unit cut staff. GM spent $400 million on Cruise in the first quarter.

GM's joint venture with LG Energy Solution, called Ultium Cells, is ramping up production of battery cells at plants in Ohio and Tennessee, as Barra noted. She also said that the company continues to see sequential and year-over-year improvements in profitability as it benefits from scale, material cost, and mix improvements.

Both GM and crosstown rival Ford Motor are relying on profit from gas-engine trucks to alleviate investors' concerns as they funnel cash into costly EV development. While GM has not broken out financial results for its EV business, CFO Jacobson maintained previous forecasts for turning a profit. He expects variable profit, which excludes fixed costs, to be positive by the second half of 2024.

Tesla, the EV leader, recently laid off more than 10% of its global staff and slashed prices on its models across several markets. It is expected to post its first revenue drop and lowest gross margin in nearly four years, according to LSEG data.

GM outlined a $10 billion stock buyback last year after reaching a costly new labor agreement with the United Auto Workers union. The company announced that the first tranche of this was completed in the first quarter.