General Motors' Strong Earnings Aren't the Reason the Stock Is Gaining

Photograph by Daniel Acker/Bloomberg

General Motors (ticker: GM) reported strong earnings Wednesday morning. That was good news for shareholders, but earnings are secondary for car companies right now.

Autonomous driving, vehicle electrification, and the state of the global economy are what investors want to hear about.

Still, the numbers were good. GM’s fourth-quarter sales and earnings topped Wall Street forecasts and the company reiterated its 2019 earnings guidance, originally given on Jan. 11. GM expects to earn $6.75 per share in 2019.

GM Financial reported improved performance year over year, too. The auto maker’s lending arm earned $1.9 billion in 2018 versus $1.2 billion in 2017, and credit quality was stable. Loan delinquencies and charge-offs fell year over year.

Finally, Cadillac was the company’s best-performing brand—Caddy sales rose 7.2% in 2018.

The back story: In its news release, GM continued to emphasize its transformation.

GM’s autonomous driving unit, Cruise, took in $5 billion in outside investment last year. And like Ford Motor (F) did when it reported earnings, GM gave investors more detail about Cruise’s financial performance. That unit lost $700 million in 2018 and $600 million in 2017. Sales are negligible, so the losses are good proxy for the amount of money GM spends on developing autonomous vehicles. GM plans to spend $1 billion in the Cruise division in 2019.

The other key frontier for auto makers is electric vehicles. On a conference call to discuss the results, analysts pressed the company on the outlook for profits. Electric vehicles aren’t earning money for GM yet, but CEO Mary Barra said her goal is for that to start early in the next decade.

That’s not that far

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