What GM, Ford traders ought to know forward of third-quarter earnings

General Motors’ global headquarters are located in the Renaissance Center in Detroit.

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DETROIT – both General Motors and Ford engine are expected to report solid third-quarter results on Wednesday despite an ongoing global disruption in supply chains, including a shortage of semiconductor chips that have depleted vehicle inventories but increased profits this year.

Both Detroit automakers did their best during the disruptions, allowing them to raise their earnings expectations for the year on record vehicle prices and earnings amid surprisingly robust consumer demand. According to analysts, this is likely to be an ongoing trend as the auto industry rebuilds inventory levels as more productions come back online in the coming weeks and quarters.

“Both should not only benefit from favorable fundamentals in an upward cyclical environment, but both have a significant opportunity to improve the perception of their long-term positioning in an EV / AV world,” Credit Suisse analyst Dan Levy said last week in an investor announcement.

Here’s what Wall Street analysts expect from every automaker’s third quarter results, as well as other things investors should know before GM reports ahead of Wednesday’s market opening, followed by Ford after the market closes.

Wall Street estimates

Analyst estimates from Refinitiv assume that GM will post earnings per share of 96 cents and sales of 26.5 billion US dollars, 25.3% less than last year.

According to Refinitiv, Ford will have earnings per share of 27 cents on auto sales of $ 32.5 billion, down 6.2%.

Expectations for the second half of the year

GM previously warned investors that its North American wholesale volume decreased by about 200,000 units in the second half of 2021 compared to the first half of the year. The company has maintained its financial guidance for the year, including adjusted earnings between $ 11.5 billion and $ 13.5 billion, or $ 5.40 to $ 6.40 per share. It made around $ 6.2 billion, or $ 4.21 per share, for the first six months of the year.

GM anticipates a $ 3.5 billion to $ 4.5 billion plunge in the second half of the year due to a $ 1.5 billion to $ 2 billion increase in raw material costs and lower revenue from its financial sector.

In July, Ford raised its guidance for the year, but informed investors that the second half of the year would be weaker than the first in terms of operating profit, which stood at $ 5.9 billion through June. At the time, the company raised its forecast for adjusted earnings before taxes for the full year by approximately $ 3.5 billion to $ 9 billion to $ 10 billion.

Deutsche Bank analyst Emmanuel Rosner assumes that both automakers will head towards the upper end of their previous ranges, if not even above.

“We expect both Ford and GM to beat consensus third quarter estimates and maintain / raise annual guidance. In addition, we see several potential catalysts on the horizon for both companies, ”he said in an investor note on Monday, citing electric and autonomous vehicle developments.

EVs / AVs

While automakers are pouring billions into electric and autonomous vehicles, the segment won’t add much to third-quarter earnings.

Both automakers released key new details last quarter about their plans for both emerging sectors, including a $ 11 billion investment by Ford in U.S. electric vehicle and battery manufacturing facilities.

GM clearly outlined financial goals like doubling sales and increasing profit margins to 12% to 14% by 2030 on an Investors Day earlier this month. The majority-owned subsidiary Cruise also said it is expected to begin charging a robot taxi service as early as next year in San Francisco pending final regulatory approval.

During the quarter, GM also said it would recognize an estimated rebound in the third quarter that included $ 1.9 billion of $ 2.0 billion in costs related to an ongoing recall of its Chevrolet Bolt EVs as part of a settlement with LG will make up for the defective batteries.

Partial structures

Ford stock is up about 80% this year, so investors will be looking for additional charges on the automaker over the next year.

You’ll also want to see any updates on the production and shipping of Ford’s F-series pickups, some of which automakers, like GM, built to get ready when chips become available.

Steve Carlisle, GM’s North American CEO, last week completed more than half the delivery of the newly assembled pickups he parked due to a shortage of semiconductor chips, according to Reuters.

When GM reported a 32.8% year-over-year sales decline for the third quarter earlier this month, GM said the semiconductor chip market had improved. November 1st is expected to be the first time since February that none of GM’s North American assembly plants will shut down due to chip shortages. However, two remain off to be retooled, and some work in fewer shifts.

GM stock is up about 40% in 2021.

– CNBCs Michael Bloom contributed to this report.