What investors should know before Tuesday’s fourth-quarter earnings

General Motors CEO Mary Barra speaks at the General Motors Factory ZERO electric vehicle assembly plant on November 17, 2021 in Detroit, Michigan.

Nic Antaya | Getty Images

DETROIT – General Motors is expected to report a relatively positive fourth-quarter profit after the markets close Tuesday, capping off an unprecedented year of supply chain issues that continue to linger in 2022.

Wall Street analysts estimate the Detroit automaker will post $1.19 per share in adjusted earnings and $34 billion in revenue, according to Refinitiv estimates. That revenue would be lower by 9.3% compared with a year earlier, largely due to constrained production caused by an ongoing global shortage of semiconductor chips.

GM’s fourth-quarter adjusted EPS is expected to be its lowest of the year, and down from $1.93 from the fourth quarter of 2020.

While investors will be monitoring GM’s quarterly results, they’re more interested in the automaker’s guidance for this year as well as insights on outside factors that could impact the company in 2022.

Here’s more on those issues and other things investors should know about ahead of GM’s fourth-quarter results after the markets close Tuesday.

Guidance

Wall Street is waiting for the company’s 2022 guidance. Due to the semiconductor chip shortage, inflation and other outside factors, analysts expect this year to be a bumpy, yet promising, one for the automotive industry.

Last quarter’s earnings “will take a back seat to 2022 guidance” which we expect to be at or below current expectations to start the year, RBC Capital Markets analyst Joseph Spak said in an investor note. “Positioning will matter as we get closer, but broadly, lower guidance could be a clearing event for the path to play autos for volume recovery.”

GM CFO Paul Jacobson told investors at a Credit Suisse conference in December that the company expects “another strong year” in 2022.

Wall Street analysts expect GM and other automakers to be conservative in their earnings guidance this year, continuing a trend from 2021.

Analysts estimate GM will earn $6.93 per share in 2022, according to average estimates compiled by FactSet. That compares with expectations of $6.83 in 2021, including $5.67 per share through the first three quarters of 2021.

Q4 earnings

In December, Jacobson said fourth-quarter results were coming in stronger than expected and increased GM’s adjusted earnings forecast for the year to about $14 billion, up from guidance that was already raised once to a range of $11.5 billion to $13.5 billion.

The new guidance pleased investors and Wall Street analysts who were disappointed when executives said the company would perform at the “high end” of its guidance range when it announced third-quarter results in October.

GM’s initial adjusted earnings guidance for the year was between $10 billion and $11 billion as it tried to forecast the impact of the ongoing semiconductor chip shortage.

GM reported an adjusted pretax profit of $3.7 billion for the fourth quarter of 2020. Revenue was $37.5 billion during that quarter.

Chips

When increasing the automaker’s guidance, Jacobson cited solid vehicle pricing, resilient consumer demand and an improving supply of semiconductor chips. However, he said GM doesn’t anticipate its vehicle inventory levels to get to any normalized amount until after 2022.

“We expect to see first quarter be probably similar to fourth quarter and then starting to stabilize and improve throughout the second half of 2022 and that’s the way we’re thinking about our budgets and our plans going forward,” Jacobson said.

The parts problem caused GM’s annual U.S. new vehicle sales to decline by 12.9% last year to 2.2 million.

Jacobson said GM hopes to achieve a “normalized run rate” for vehicle production by the end of 2022, followed by more normal inventory levels.

Outside factors

Inflation, higher interest rates and other outside factors such as commodity costs are expected to continue to impact the global auto industry in 2022. Investors will want to know more on how these topics are expected to impact GM’s business this year.

“In our view, the single biggest risk to our volume forecasts is that the broader economic environment and health/confidence of the consumer remains very much unclear,” BofA Securities analyst John Murphy said in a recent investor note.

Elaine Buckberg, GM’s chief economist, called inflation “the biggest cloud on the horizon” for the economy during an event last month, according to the Detroit Free Press.

Buckberg also has said the automaker expects a modest rise in interest rates this year as the Federal Reserve normalizes policy.

After GM’s shares soared 40% in 2021, they declined 10% in January. The stock closed Monday at $52.73 a share, up by 5%.

 — CNBC’s Michael Bloom contributed to this report.

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