GM shares sink 7% despite second-quarter beat as Wall Street fears 'good times won't last'

DETROIT — General Motors is raising several key financial targets for 2024 after easily beating Wall Street's earnings expectations for the second quarter, while it restructures money-losing operations such as autonomous vehicles and its China business.

The Detroit automaker now expects full-year adjusted earnings before interest and taxes of between $13 billion and $15 billion, or $9.50 and $10.50, up from previous guidance of $12.5 billion to $14.5 billion, or $9 and $10, previously. It also raised its adjusted automotive free cash flow forecast, while slightly lowering the range for its net income attributable to stockholders by less than 1%.

Despite the solid financial results, shares closed Tuesday at $46.38, down 6.4% — marking the stock's worst daily decline since December 2022.

Investors balked at pullbacks in growth businesses, waning upside during the second half of the year, and fear that the automaker's earnings power has peaked, according to Wall Street analysts

"Impressive results considering large losses in EVs, Cruise and China. History suggests the good times won't last," Morgan Stanley analyst Adam Jonas said Tuesday in an investor note.

RBC Capital Markets' Tom Narayan pointed to expectations from GM that earnings during the second half of the year will be $2.5 billion lower than earnings in the first half. He also cited GM's China business as a headwind and said Wall Street is losing hope for an additional guidance raise.

"Many investors who have been waiting for the price normalization narrative to take place after years of unprecedented inflation, likely see the GM commentary as an important data point that we could be at the beginning of a deflationary cycle," Narayan said.

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