GM misses Wall Street Q2 earnings expectations, raises 2021 guidance

General Motors on Wednesday missed Wall Street’s earnings expectations for the second quarter despite a record operating profit. It also raised its guidance for the year.

Here’s how GM did compared with what Wall Street expected based on average estimates compiled by Refinitiv.

  • Adjusted EPS: $1.97 vs. $2.23 expected
  • Revenue: $34.17 billion vs. $30.9 billion expected

GM’s second-quarter earnings were dragged down by some $1.3 billion in warranty recall costs, including $800 million related to the Chevrolet Bolt EV. The electric vehicle has been recalled twice in the past year due to fire risks, most recently last month.

The automaker raised its adjusted full-year guidance to between $11.5 billion and $13.5 billion, or $5.40 to $6.40 a share, up from $10 billion to $11 billion, or $4.50 to $5.25 a share.

But the second-quarter results were at the low end of GM’s previously guided range and the increased guidance for the year was lower than some analysts expected. GM CFO Paul Jacobson described the company’s outlook to investors Wednesday as “cautious.”

GM shares were down by as much as 9.8% during intraday trading Wednesday before closing at $52.72 a share, down 8.9%. It was the company’s worst daily loss by percentage since the beginning of the coronavirus pandemic in March 2020, according to FactSet.

The automaker expects headwinds of between $3.5 billion and $4.5 billion during the second half of the year, including commodity costs rising by $1.5 billion and $2.0 billion and lower earnings from its financial arm. GM also expects to produce about 100,000 vehicles less in North America during the second half of the year compared to the first six months.

On an unadjusted basis, net income was $2.8 billion for the second quarter compared with a loss of $758 million a year earlier, when the coronavirus pandemic caused rolling shutdowns of its factories. The automaker reported pretax adjusted earnings of $4.1 billion for the second quarter, up from a loss of $536 million a year earlier.

“Everyone has been demonstrating remarkable resiliency and adaptability in this rapidly changing environment,” GM CEO Mary Barra said Wednesday during a call with reporters.

The adjusted earnings were a record for the second quarter, topping GM’s adjusted earnings before interest and taxes of $3.9 billion, or $1.86 a share, in 2016.

GM has been weathering challenges from a global shortage of semiconductor chips, which has caused factory shutdowns and is expected to shave billions off the industry’s earnings in 2021.

GM on Tuesday confirmed its three North American full-size pickup truck assembly plants will be shut down next week due to the shortage.

The automaker previously said it expected the chip shortage to cut $1.5 billion to $2 billion to its earnings. Jacobson on Wednesday declined to update those expectations, citing changing circumstances and better-than-expected profits helping offset those impacts.

“The chips really represent a little bit more of a lost opportunity of what could have been even better, but the year is actually progressing quite well and I think we’ve overcome all of those initial expectations to exceed what we what we thought we could do at the beginning of the year,” Jacobson told reporters on a call.

Barra said GM will “continue to see the impact” of the chip shortage this year and into 2022.

In June, GM projected better-than-expected results in the second quarter despite the industrywide impact of the shortage, which also is causing record vehicle pricing and profits.

The company said it expected its first-half EBIT-adjusted to range from $8.5 billion to $9.5 billion due to continued strong demand, better-than-expected results at GM Financial and improved near-term production. That was up from a forecast earlier this year of $5.5 billion.

Correction: An earlier version misstated the day for GM’s earnings release. It was Wednesday.

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