GM’s Earnings Outlook Amidst Tariff Turmoil
As General Motors prepares to release its second-quarter earnings, the spotlight is on the ramifications of President Donald Trump’s auto tariffs and their influence on the automaker’s bottom line. Investors are particularly keen to gauge how these tariffs will shape GM’s financial results and any adjustments to its full-year guidance.
Tariff Impacts: A Double-Edged Sword
The automotive industry has been anticipating some form of relief from tariffs, but the status quo remains as Trump’s 25% levies on imported vehicles and many auto parts are firmly in place. In a strategic move to mitigate potential fallout from these tariffs, GM recently announced a significant $4 billion investment in U.S. plants. This includes relocating or ramping up production for two vehicles previously made in Mexico.
Additionally, GM aims to boost production of gas-powered SUVs and pickup trucks in Michigan. While the company indicated in May that it believes it can offset at least 30% of the anticipated cost spikes from tariffs, a reevaluation of its financial outlook has led to a lowered 2025 earnings forecast, now factoring in a projected $4 billion to $5 billion impact.
GM’s revised guidance is a stark shift from earlier projections, reflecting the unpredictable landscape shaped by tariff changes implemented by the Trump administration. These revisions include reimbursement models for manufacturers on U.S. parts and changes that address the compounding effect of tariffs.
Forecasted Financials Under Pressure
Wall Street’s expectations for GM are moderate, with estimates suggesting adjusted earnings per share of $2.44 and revenue of $46.4 billion. These figures represent a decline of 3.3% in revenue and a significant drop of 20.3% in adjusted earnings per share when compared to the same quarter last year. For context, GM’s second quarter of 2024 showed revenue of $47.97 billion and adjusted earnings before interest and taxes at $4.44 billion.
The company’s full-year outlook has also been significantly revised. The adjusted earnings before interest and taxes forecast now lies between $10 billion and $12.5 billion, a decrease from the previous guidance of $13.7 billion to $15.7 billion. Similarly, net income projections have slid from a prior range of $11.2 billion to $12.5 billion down to $8.2 billion to $10.1 billion. It’s clear that ongoing tariff implications will continue to stifle growth prospects for GM.
Investor focus will not solely be on earnings. There’s considerable anticipation regarding GM’s commitment to electric vehicles, especially now that Trump’s new tax-and-spending bill is set to phase out the $7,500 tax credit for new electric vehicles after September 30. Barclays recently projected that this legislative change could slow the rollout of EV models across the industry, while Deutsche Bank anticipates a pull-forward of EV sales among manufacturers, including GM.
GM’s ambitious target to transition to an all-electric lineup by 2035 seems increasingly contingent on consumer demand, which has lagged behind expectations. As the automaker navigates these uncertain waters, its stock currently holds an overweight rating with a price target of $56 per share, according to data compiled by FactSet.