In preparation for the Super Bowl tomorrow, companies have been releasing teasers of their commercials to come. And there was one in particular that caught my eye.
General Motors Company (GM) and Netflix, Inc. (NFLX) have partnered with comedy actor Will Ferrell to showcase new GM electric vehicles (EVs) – and possibly other EV manufacturers – in spoofs of popular Netflix shows.
The main goal is to help normalize EVs for the average American household and help make them feel more accessible. GM’s Chief Marketing Officer, Deborah Wahl, stated that “the more we see electric vehicles show up in this type of binge-worthy content, the faster everyone gets used to them.”
Now, while we’re on the topic of EVs… The Hummer plant at Factory Zero in Detroit commenced last week. GM has 90,000 Hummer orders that it needs to fulfill. Ironically, GM decided to launch the Hummer before its Denali Edition 1 pickup, which it hopes to begin delivering in early 2024.
GMC & Buick Global Vice President Duncan Aldred said at a roundtable, “What is more of a limiting factor is the amount of battery cells that are available.” The Hummer has a 212-kwh battery pack, which is double what most EVs need, so this flagship vehicle is actually constraining GM’s overall EV production.
GM’s sole battery supplier, LG Energy Solution, obtained a $2.5 billion loan to build three new U.S. battery plants to supply GM in Michigan, Ohio and Tennessee. Unlike Ford Motor Company (F), Tesla, Inc. (TSLA) and Volkswagen Group (VWAGY), GM is not planning on utilizing iron-phosphate batteries to supplement the shortage of lithium-ion batteries that is constraining production for many EV models.
As these production constraints continue, it will be interesting to see what happens to EV sales. So, it’s great that earnings season is here, because it gives investors a better picture of what is happening with the EV market.
So, in today’s Market 360, let’s dig a little deeper and look at some of the auto manufacturers that recently reported their quarterly earnings.
General Motors Company (GM) – Announced Tuesday, January 31
General Motors’ fourth-quarter report beat analyst expectations and revealed that the company anticipates another solid year in 2023. For the fourth quarter, the company reported revenue of $43.1 billion and earnings of $2.12 per share. Analysts expected revenue of $40.65 billion and earnings of $1.69 per share.
For its fiscal year 2022, GM reported adjusted earnings of $7.59 per share on $156.7 billion in revenue, which represented 7.4% annual earnings growth and 18.9% annual revenue growth.
For full-year 2023, company management forecast net income attributable to stockholders to be between $8.7 billion and $10.1 billion. Adjusted earnings are expected to be between $6.00 and $7.00 per share.
Looking at GM’s future EV plans, the company is entering phase two of its EV acceleration. With this, GM will offer nine EV models in 2023. This includes the first electrified, all-wheel-drive Corvette. GM also stated that it expects its EV business to generate over $50 billion in revenue by 2025.
General Motors is currently number one in the U.S. for total sales, full-size pickup trucks and large luxury SUVS as well as luxury sports cars.
Ford Motor Company (F) – Announced Thursday, February 2
Ford shares dipped following the company’s mixed quarterly report, however, the auto manufacturer posted stunning year-over-year earnings growth. Fourth-quarter adjusted earnings nearly doubled to $0.51 per share, up from $0.26 per share in the fourth quarter of 2022. Analysts expected adjusted earnings of $0.62 per share. Fourth-quarter revenue grew 17% year-over-year to $44.0 billion, which topped estimates for $40.37 billion.
For its fiscal year 2022, Ford reported adjusted earnings of $1.88 per share on $158.1 billion in revenue, which represented 18.2% annual earnings growth and 16% annual revenue growth. The consensus estimate called for full-year adjusted earnings of $1.99 per share on $146.56 billion in revenue.
Ford noted that 650,000 F-Series trucks were shipping in 2022, claiming the best-selling truck in America for the 46-consecutive year. The company also expects to produce 600,000 electric vehicles per year by the end of 2023 – and aims to produce two million by the end of 2026.
Before the earnings report, Ford announced on Monday, January 31, that it is lowering the price of its Mach-E by $600 to $5,900 depending on the model. Although the Mach-E has not been profitable for Ford due to higher battery component costs, Mach-E production is expected to increase from 78,000 annual production to 130,000 this year.
Mari Gjajs, the head of Ford’s EV business said, “We are responding to changes in the marketplace” and added, “As we look and want to stay competitive in the marketplace, we’re having the respond.”
Ford Motor is currently number two in U.S. EV sales, so clearly it intends to continue to capture a significant share of EV sales.
Toyota Motor Company (TM) – Announced Wednesday, February 8
The latest results from Toyota revealed better-than-expected earnings for its third quarter in fiscal year 2023 but provided weak forward-looking guidance. For the third quarter, net profit declined 8.1% year-over-year to 727.94 billion yen, or $5.54 billion. However, this topped analysts’ estimates for 717.6 billion yen.
Revenue increased 25.2% year-over-year to 9.755 trillion yen, or $74 billion. Company management also maintained its full-year 2023 guidance for retail vehicle sales of 10.4 million.
For the first nine months in fiscal year 2023, Toyota reported earnings per share of 138.78 yen which represented a 16% earnings decline from 166.45 yen a year ago.
Company management commented:
“Under circumstances where production plans fluctuated greatly due to factors such as semiconductor shortages and natural disasters, we worked hard with our dealers, suppliers, and production sites. Operating income for the first nine months decreased, but operating income for the third quarter alone increased, as the positive effects of a weaker yen and volume increase exceeded the negative effect of soaring materials prices.”
Taking a peek under the hood at Toyota’s EV numbers, the auto manufacturer sold 12,000 worldwide. Hybrids and EVs accounted for almost 28% of Toyota’s sales. U.S. sales rose 13% year-over-year to 536,740 vehicles. Brand sales increased nearly 17% to 476,648 vehicles.
Now, along with earnings, Toyota also announced its new promotion with Nintendo ADR (NTDOY) that will allow 500 Grand Highlanders customers to receive a Nintendo Switch with the Mario Kart 8 game included. “This is an amazing collaboration between Toyota and Nintendo. The Grand Highlander and the Nintendo Switch are the ultimate duo for families and road trips,” said Lisa Materazzo, group vice president of Toyota Marketing.
Honda Motor Company (HMC) – Announced Friday, February 10
Honda reported solid third-quarter earnings before the market open yesterday. Third-quarter revenue increased 17.3% year-over-year to 12,523.4 billion yen, up from 10,677.0 billion yen a year ago.
Honda noted that operating profit was 733.9 billion yen, a 9.3% year-over-year increase from 671.6 billion yen a year ago. This marks a new record for the company. Honda’s motorcycle business revenue climbed 37.5% year-over-year to 2,202.3 billion yen, which was “due primarily to higher sales in Asia and favorable currency effects.” However, Honda still cut its full-year sales revenue by 150 billion yen to 17,250 billion yen.
Regarding Honda’s EV plans, the company expects to launch a commercial-use mini-EV in Japan starting in the spring of 2024. Company management also announced a line of new electric motorcycles in Europe and China, making Honda the frontrunner of the electric motorcycles global market.
Based on the earnings reports and guidance, EV growth is tapping the brakes for most of these companies. If you’re looking for growth, then consider the energy sector. As I discussed in Friday’s Market 360 article, the energy sector continues to post the best earnings growth. It’s why my Growth Investor Buy Lists are heavily overweighted in energy stocks, and I expect them to do well this year as natural gas and crude oil prices firm up.
Editor, Market 360
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The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: