Earnings Outlook: GM has a tough act to follow this week after Tesla and Ford beats

Both auto makers said they remained worried about chip shortages, with Ford saying the supply flow was expected to improve in the third quarter and beyond. Tesla Chief Executive Elon Musk told investors the chip shortage “remains quite serious” and it’s a limiting factor in Tesla’s output.

Wall Street will pay close attention to what GM will have to say about the chip shortage and other supply snags, and look for guidance updates for the remainder of the year.

Back in June, GM said it was “optimistic” about 2021 and promised to detail the reasons for it with its earnings. The auto maker also said it expected a “significantly better” first half of 2021 than it previously thought and that it hoped to increase vehicle deliveries in the U.S. and Canada.

“The bar is high heading into earnings with both Ford and Tesla having posted beats, and Ford having raised full-year earnings guidance by a significant margin despite the challenges presented by ongoing semiconductor shortages,” said CFRA analyst Garrett Nelson.

Here’s what to expect:

Earnings: The consensus estimate from 23 analysts polled by FactSet calls for GM to report adjusted earnings of $1.82 a share, which would contrast with an adjusted loss of 50 cents a share in the second quarter of 2020. GAAP earnings are seen at $1.36 a share.

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts, as well as buy-side analysts, fund managers, company executives, academics and others, is expecting an adjusted profit of $1.98 a share.

Revenue: The analysts surveyed by FactSet expect sales of $29.92 billion for GM, up from $16.8 billion a year ago. Estimize sees revenue of $30.31 billion for the company.

Stock movement: GM shares have outperformed the broader market, up about 37% compared with gains of around 17% for the S&P 500 index. The outperformance widens over a 12-month view, with GM up 129% and the S&P up 34%.

GM stock performance this year also compares with gains of 58% for Ford shares and 1% for Tesla Inc. stock in the same period.

What else to expect: More than anything, investors are going to demand answers on the strategic front given recent developments for GM, Nelson said.

“For example, how can consumers have confidence in the company’s all-EV strategy and forthcoming models, when it is telling buyers they can’t even charge their bestselling EV model, the Chevy Bolt, in their garage because of a fire risk?”

GM recalled the Bolt for a second time late last month due to the fire hazard.

Investors will also seek some clarity on GM’s entanglement with electric-truck maker Nikola Corp. after their final agreement, detailed in November, was deemed to have gone from “game changer” to “nothing to write home about” by Wall Street.

That continues to raise questions about GM’s due diligence, “particularly in hindsight after the charges brought against Nikola’s founder and former executive chairman (Trevor Milton) last week,” Nelson said. Milton was indicted on three counts of fraud by the U.S. Attorney’s Office for the Southern District of New York for making “false and misleading statements” to investors regarding “nearly all aspects of the business,” according to a grand jury indictment that was unsealed on Thursday. 

Wall Street is also likely to focus on updates about GM’s plans to build two additional battery cell plants in the U.S. by 2025, besides its two similar plants under construction in Tennessee and Ohio.

More details in general about GM’s $35 billion plan to pivot to EVs and autonomous driving capabilities are also high on the list for investors.

Wedbush analyst Dan Ives in July started his coverage of GM’s shares with the equivalent of a buy rating, seeing “a renaissance of EV growth” in Detroit.

“GM is putting their money where their mouth is and are going all-in on the electric vehicle arms race playing out across the auto industry,” he said.

If GM proves out its EV vision over the coming years “the stock will be re-rated more as a disruptive technology and EV play, rather than its traditional auto valuation.”