General Motors Co (NYSE: GM) is poised to gain from the Federal Reserve’s anticipated rate cuts beginning in September, according to Paul Jacobson, the company’s Chief Financial Officer.
In an interview with CNBC, Jacobson highlighted that lower interest rates will reduce monthly car payments, providing a significant boost to the automaker’s performance.
Strong Q2 performance
General Motors recently reported impressive second-quarter results, surpassing analysts’ expectations.
The company earned $3.06 per share on revenue of $47.97 billion, well above the forecasted $2.75 per share and $45.46 billion in revenue.
Despite this strong performance, GM’s shares fell 6.0% on Tuesday, reflecting broader market dynamics.
Jacobson credited GM’s robust performance to its successful lineup of full-size pickup trucks, which saw a 3.5% increase in market share during Q2.
The new Chevy Trax has also been a standout, with sales nearly doubling each month and the model proving more profitable than its predecessor.
Jacobson emphasized that GM’s current product portfolio is the strongest in its history.
Resilient customer base and EV growth
Jacobson noted that GM’s customers have remained resilient even amid a higher interest rate environment.
Notably, electric vehicle (EV) sales surged by 40% in Q2, significantly outpacing the industry average growth of 11%.
GM is on track to produce up to 250,000 EVs in 2024, aiming to achieve variable profit positive status and move closer to EV profitability.
Full-year guidance raised
In light of its strong performance, General Motors has raised its full-year guidance.
The company now expects pricing to decline by up to 1.5% in the latter half of the year, an improvement from the previously estimated 2.5% decrease.
Additionally, GM plans to restructure its underperforming operations, including its autonomous vehicle division and its business in China.
Last month, GM authorized an additional $6 billion for share repurchases.
Market outlook and analyst ratings
Wall Street analysts currently have a consensus “overweight” rating on GM stock, with an average target price of $55.
This suggests a potential upside of over 20% from current levels.
The anticipated rate cuts and GM’s strategic initiatives are expected to enhance its financial performance and shareholder value.
Overall, the combination of favorable interest rate adjustments, strong vehicle sales, and strategic restructuring positions General Motors for continued growth and increased profitability in the coming months.
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