General Motors shares are on a heater this week after the automaker reported second-quarter results ahead of expectations and raised its full-year guidance.
Despite formidable headwinds, including tariffs and rising gas prices, GM reported a 30% increase in profits year over year. GM’s second-quarter earnings before interest and tax rose to $3.94 billion from $3 billion last year. That translates to $3.57 per share, easily topping analyst estimates of $3.20.
According to CEO Mary Barra, “Customer demand in North America remains strong, driven by our very attractive lineup of pickups and SUVs. Pricing is consistent, and we delivered the best quarter and first half ever for new Super Cruise-equipped vehicles.”
In addition to increasing EBIT margins in North America, GM says it was able to lower warranty costs, reduce EV losses, and increase its operating efficiency in the second quarter.
“We expect these trends will continue to strengthen our performance into 2027 and beyond because we have multiple engines of margin expansion and growth while maintaining our capital discipline,” Barra said.
General Motors is so confident right now that it raised its full-year earnings guidance to between $12 and $14 per share, up from its previous expectations of between $11.50 and $13.50. It also raised its adjusted EBIT expectations to between $14 billion and $16 billion from its previous expectation between $13.5 billion and $15.5 billion.
Deutsche Bank raises expectations for GM after earnings
Deutsche Bank analysts were impressed by GM’s strong second quarter results, leading them to raise the company’s price target, expected EPS, and expected revenue in their most recent note.
GM has a new $100 price target, up from $90 per share, that is 18% higher than the stock’s trading level on Wednesday, July 22. DB analysts expect General Motors to report earnings of $13.64 for the year, up from their previous expectation of $12.82 per share, on revenue of $168.9 billion, up from its previous revenue expectations of $165 billion.
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“GM’s 2Q performance and raised FY26 outlook continue to demonstrate strong execution amid macro headwinds and geopolitical uncertainties. With 1H in the books, we think the full year’s profitability will continue to land on the higher end of the lifted range, supported by better warranty and pricing,” Deutsche Bank analysts led by Edison Yu said.
The firm seems particularly impressed with the performance considering a macroeconomic environment that seems to be working against General Motors and other original equipment manufacturers.
The $3.94 billion EBIT topped the firm’s internal $3.83 billion expectations, and DB says much of that overperformance came from the $300 million in lower warranty costs. Additionally, the $5.03 billion in adjusted free cash flow GM reported reflects “significant contributions from working capital, profit flow through and timing of capex.”
Morgan Stanley raises GM price target after Q2 earnings
Morgan Stanley already had a $100 price target on GM from its increase weeks ago, but the firm felt compelled to raise that price target to $101 Wednesday after GM’s earnings beat.
The firm cited GM’s strong performance in North America and its new and improved guidance for Morgan Stanley’s slightly improved outlook. The firm cited the same reasons GM and Deutsche Bank cited for the improved outlook, while also pointing to software and services as an underappreciated growth driver.
“GM is positioning the digital services vector as an increasingly material and less-cyclical earnings engine, with 1mn new digital subscriptions expected in 2026 supporting more than $3bn of recognized revenue,” analysts led by Andrew S. Percoco said. “In 2Q, deferred revenue reached $6.3bn (+50% y/y) and is on track to reach $7.5bn by year-end, supporting double-digit realized revenue growth in 2027 at ~70% gross margins. We expect to see longer-term software and services growth driven by 1) increasing availability of Super Cruise across additional vehicle models/trims, 2) scaling high-margin subscription revenue following the included service period, and 3) increasing ARPU as functionality improves (i.e., eyes off).”
“We believe GM’s software and services business has the potential to drive a significant re-rating in the shares as the company accrues high-margin revenue through the P&L, and continues to add disclosure around the outlook for this business,” Percoco said.
Related: General Motors analyst spots customer trend investors should watch
