Is General Motors stock ready for a turnaround? 3 charts that might convince you

Detroit automaker General Motors (GM 1.81%)has lost around 35% of its value since the start of the year, as the company faces chip shortages, economic uncertainty and the possibility that rising interest rates will hamper consumer demand in the short term. term.

Despite these headwinds, GM delivered a strong third quarter, and here are three simple charts from its North American profit region that might convince you that it’s ready to reverse its decline even in the face of uncertainty.

Record turnover

GMNA net revenue and inventory from the third quarter 2022 earnings deck. Image source: General Motors.

These two charts go together (think of it as a 2-to-1 bonus) and show why GM might be poised to continue to improve in the near term. After a year of inventory crippled by semiconductor chip shortage, the company is finally improving its supply chain/chip shortage and inventory.

Improved supply chain led to increased inventory, which is a positive thing at the moment, which helped to drive wholesale sales up 85% year-over-year and resulted in the highest quarterly revenue result ever of $34.7 billion. Expect this trend to continue in 2023.

Solid net income

Chart showing jump in EBIT-adjusted margins

GMNA EBIT-ADJ Third Quarter 2022 Earnings Platform results. Image source: General Motors.

As many investors painfully know, rising revenue doesn’t matter as much if the bottom line is moving in the opposite direction, especially for companies as large and established as General Motors.

The good news is that GM posted exceptionally strong EBIT-adjusted earnings with a strong margin of 11.2% and gained 320 basis points of market share in the United States, compared to the third quarter. of the previous year.

The future is coming, fast

Chart showing GM's electric vehicle sales in the United States nearly doubled from the previous quarter.

GM electric vehicle sales. Image source: General Motors Third Quarter 2022 Earnings Presentation.

Perhaps the most compelling reason GM is poised to turn itself around is its preparation for the next electric vehicle (EV) revolution. Over the past few decades, management arrogance crippled the company as consumer tastes changed, but that’s no longer the case, and GM has long been preparing for a shift in electric vehicle sales. .

2024 Silverado from General Motors.

2024 Silverado EV RST from General Motors. Image source: General Motors.

GM posted its best quarterly electric vehicle sales result, nearly doubling its market share in North America from the second quarter. Expect this trend to continue as it prepares to launch a number of luxury trucks, SUVs and electric vehicles over the next two years. As the automaker scales its Ultium platform in the near term, it will position the company to increase the volume, efficiency and profitability of its electric vehicles over time.

Ready for a turnaround?

GM’s third quarter was strong in the face of headwinds, and these charts from its North America earnings-producing region suggest the company has momentum in key areas to help push its results up until those Headwinds can potentially turn into tailwinds.

Third-quarter earnings helped the company confirm its full-year guidance in the face of challenging economic environments and boosted GM’s auto free cash flow by $9 billion from to the previous year.

A quarter isn’t a trend, but if management continues to improve its supply chain and meet high expectations for electric vehicles, GM is definitely well positioned for a rebound.

Daniel Miller holds positions at General Motors. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

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