GM - Embedded Expectations Analysis - 2021 10 20
General Motors Company (GM:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 13.0x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain muted, but management is confident about their adjusted EBIT guidance, pricing strength, and zero-emissions initiatives.Specifically, management is confident they are raising 2021 adjusted EBIT guidance to $11.5 billion-$13.5 billion and they exceeded expectations by driving a strong price mix in North America. In addition, they are confident they have put tools in place to help dealers maintain supply of customer-desired vehicles. Furthermore, management is confident they are focused on investing in zero-emission solutions and their ability to temporarily build cars without modules is helping them navigate short-run supply pressures.
General Motors designs, builds and sells trucks, crossovers, cars and automobile parts. The company also provides automotive financing services through its subsidiary, General Motors Financial Company, Inc. (GM Financial). GM Financial provides retail loan and lease lending across the credit spectrum. GM Financial provides commercial lending products to dealers including new and used vehicle inventory floorplan financing and dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial lending products include financing for parts and accessories, dealer fleets and storage centers.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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