General Motors Investors Welcome $10B Buyback, But Goldman Sachs Says Automaker Must Show EV Progress

General Motors was riding high today following its announcement on Wednesday of further shareholder returns and the reinstatement of its full-year guidance.

Shares in General Motors Co (NYSE:GM) were up 0.76% at $31.83 on Thursday, following a 9.4% surge in the previous trading session.

The company reissued full-year guidance after dropping it in the third quarter due to an ongoing dispute with the United Auto Workers union. General Motors now expects full-year earnings between $11.7-$12.7 billion, down from an earlier estimate of $12-$14 billion.

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GM’s Share Buyback Bonanza

While investors may have been disappointed by lower profit guidance, this was offset by the announcement General Motors was returning $10 billion to shareholders through an accelerated share repurchase program, and raising its full-year dividend by 33%.

“While we believe the underlying cash flow and buyback will be viewed well by the market, we believe the company will need to show better progress on key technologies including EVs, software and autonomy,” said Mark Delaney, analyst at Goldman Sachs.

Goldman Sachs raised its price target on General Motors from $42 to $45 and maintained its Buy rating.

GM’s Lowered Earnings Guidance

The lowered guidance was largely due to the extra labor costs following its settlement with UAW workers, with the ratified contracts having a total cost impact on full-year 2023 earnings of $1.3 billion.

Analysts said the move provided clarity and it could now focus on fixed cost reductions in 2024.

“We believe GM has now taken back the reins on this situation with a clear vision forward and remain confident in the company's trajectory heading into FY24 with profitability and EV production the two largest focuses looking forward,” said Daniel Ives at Wedbush.

Wedbush maintained its Outperform rating on the stock but lowered its target price from $46 to $40.

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