Despite the economic landscape facing headwinds resembling a tumultuous storm at sea, General Motors’ GM stock has unapologetically steered its course to fresh 52-week highs. The titan of the automotive industry recently unveiled a magnum opus of sorts – an additional $6 billion earmarked for stock buybacks.
Well-received by investors, this move follows a $10 billion accelerated share repurchase program launched last year and a 33% dividend hike heralding 2024 with unwavering determination.
Reveling in Recent Triumphs
Inching closer to the $50 mark, General Motors has surged +34% year-to-date, outshining Ford’s near-stagnant performance and eclipsing Tesla’s downward -32% trajectory. Against the broader garden of indices, General Motors stands tall, boasting a robust +6% gain in the S&P 500 arena and a Nasdaq perch with +15% gains for the year.
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While Tesla grapples with sluggish EV sales, General Motors has reveled in the glow of augmented profits, nourished by a garden of EVs and conventional gasoline vehicles. The auto behemoth attributes its recent accolades to operational prudence, with free cash flow mushrooming to nearly $30 billion, setting the stage for the recent repurchases and dividend elevation.
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Glimpsing into Earnings and Valuation
General Motors’ profitability upswing appears destined for the stars, with fiscal 2024 earnings projected to soar by 22% to $9.40 per share, dwarfing last year’s $7.68 milestone. A further 1% leap is in the forecast for FY25 EPS.
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Of greater intrigue is the fact that General Motors continues to trade at a mere 5X forward earnings, a serene dip below Ford’s 6.2X, the industry’s 12.8X average, and a cavernous abyss from the S&P 500’s 21.7X and Tesla’s stratospheric 70.4X.
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The Resurgent Dividend
After resuscitating its dividend in 2022 post-pandemic, General Motors lifted it from 3 cents per quarter to a sprightly 12 cents at the dawn of this year.
Though General Motors’ 1.01% annual dividend yield still pales against Ford’s 4.85%, it inches closer to the S&P 500’s 1.38% average, a stark reminder that many auto stocks, including Tesla, eschew payouts to foster growth.
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Conclusion
Following an arduous year-to-date rally, General Motors stock now sports a Zacks Rank #3 (Hold). Though the horizon may flit with better buying prospects, steadfast long-term investors stand poised to reap rewards from General Motors’ amplified profitability and sultry P/E valuation.
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