Morningstar

GM Earnings: Good Tariff News Leads to Guidance Increase

We’ve raised our fair value estimate of GM stock.

In this photo illustration a General Motors Company logo seen displayed on a smartphone with a General Motors Company logo in the background.
SOPA Images via Getty
Securities in This Article
General Motors Co
(GM)

Key Morningstar Metrics for General Motors

What We Thought of General Motors’ Earnings

General Motors GM stock rose over 16% during Oct. 21 trading after the company increased 2025 profit and EPS guidance and said 2026 profits are expected to be stronger than 2025. Third-quarter adjusted diluted EPS of $2.80 beat the $2.31 LSEG consensus.

Why it matters: We see the auto industry in a period of high uncertainty due to US tariffs and US consumer vehicle affordability struggles. GM’s adjusted EBIT fell 18% year over year but its confidence to raise guidance and a positive outlook on 2026 is a good sign for the near term.

  • Management also reduced its gross 2025 tariff hit for adjusted EBIT to a midpoint of $4 billion from $4.5 billion, and they expect about 35% of the impact to be mitigated. The lesser tariff hit is from the United States expanding the imported parts available for tariff relief on Oct. 17.
  • The third-quarter tariff impact was also not as bad as management planned due to labor disruptions reducing Korean production. GM imports four vehicles into the US from there, and this production and related payables will likely be a fourth-quarter headwind versus third quarter.

The bottom line: We are raising our fair value estimate for no-moat GM to $80 per share from $77. The change is from time value of money and a lower share count to reflect us now modeling $4.5 billion in 2025 buybacks, up from $3.0 billion. Buyback spending through the third quarter totaled $3.5 billion.

  • We’re glad to hear management does not sound like it is going to slow down share repurchases as we still see the stock as undervalued. Third-quarter buybacks of $1.5 billion leave the authorization at $2.8 billion and automotive cash and securities of $21.8 billion leaves flexibility to buy more.
  • Further profit upside to 2025 from less tariff impact could occur if the US and South Korea implement their tariff agreement to lower US tariffs on vehicles to 15% from 25%. GM’s new guidance does not factor in that tariff change, and we think it could mean nearly another $1 billion of adjusted EBIT.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center