General Motors (GM) wrapped up a successful 2024, delivering fourth-quarter results that exceeded Wall Street’s expectations. Looking ahead, the company is optimistic about 2025, anticipating an even more impressive performance in terms of earnings.
Yet, despite these upbeat results, GM’s stock took a nosedive of over 10% on Tuesday morning. By 11:44 a.m. ET, shares were still down by 10.4%. So what caused this sharp decline after such positive news?
A major factor could be the impressive run GM’s stock had in 2024, surging by nearly 50%. Investors might be cashing in their gains, especially given what wasn’t mentioned in GM’s latest report.
During the quarter, GM achieved $2.5 billion in operating profits, contributing to an annual total of $14.9 billion, which hit the upper range of their guidance. However, net income took a hit due to restructuring costs in China and expenses from closing its Cruise robotaxi unit.
Despite this, GM is optimistic about doubling its net income in 2025, with an operating profit forecast of $14.7 billion at the midpoint, comfortably surpassing Wall Street’s predictions.
However, there’s a caveat to this promising outlook. GM’s optimistic forecast hasn’t factored in potential policy changes from the Trump administration this year. Many anticipate the removal of the federal EV tax credit in 2025, which could elevate car prices for consumers and dampen demand. Moreover, President Trump’s plans to introduce a 25% tariff on Canadian and Mexican imports could immediately impact GM, necessitating price hikes. These countries are critical suppliers of parts and have assembly plants crucial to U.S. automakers.
Despite these possible hurdles, GM has been aggressively buying back its shares, reducing its share count by over 25% in the past three years. However, there was no new information on its capital return strategy, leaving investors uncertain and prompting some to sell off their shares on Tuesday morning.
