Here’s how to evaluate GM’s slide in shares today

CNBC Television published this video item, entitled “Here’s how to evaluate GM’s slide in shares today” – below is their description.

The Investment Committee discusses General Motors’ sliding stock, which they all own. Jim Lebenthal is confident this is temporary and as soon as the chip shortage abates, the company will rebound. And, Joe Terranova debates whether it’s worth dumping General Motors in favor of other stocks like CarMax. For access to live and exclusive video from CNBC subscribe to CNBC PRO:

General Motors on Wednesday missed Wall Street’s earnings expectations for the second quarter despite a record operating profit. It also raised its guidance for the year.

Here’s how GM did compared with what Wall Street expected based on average estimates compiled by Refinitiv.

Adjusted EPS: $1.97 vs. $2.23 expected

Revenue: $34.17 billion vs. $30.9 billion expected

GM’s second-quarter earnings were dragged down by some $1.3 billion in warranty recall costs, including $800 million related to the Chevrolet Bolt EV. The electric vehicle has been recalled twice in the past year due to fire risks, most recently last month.

The automaker raised its adjusted full-year guidance to between $11.5 billion and $13.5 billion, or $5.40 to $6.40 a share, up from $10 billion to $11 billion, or $4.50 to $5.25 a share.

But the second-quarter results were at the low end of GM’s previously guided range and the increased guidance for the year was lower than some analysts expected. GM CFO Paul Jacobson described the company’s outlook to investors Wednesday as “cautious.”

GM shares were down by more than 8% during Wednesday morning trading to about $53 a share.

The automaker expects headwinds of between $3.5 billion and $4.5 billion during the second half of the year, including commodity costs rising by $1.5 billion and $2.0 billion and lower earnings from its financial arm. GM also expects to produce about 100,000 vehicles less in North America during the second half of the year compared to the first six months.

On an unadjusted basis, net income was $2.8 billion for the second quarter compared with a loss of $758 million a year earlier, when the coronavirus pandemic caused rolling shutdowns of its factories. The automaker reported pretax adjusted earnings of $4.1 billion for the second quarter, up from a loss of $536 million a year earlier.

“Everyone has been demonstrating remarkable resiliency and adaptability in this rapidly changing environment,” GM CEO Mary Barra said Wednesday during a call with reporters.

The adjusted earnings were a record for the second quarter, topping GM’s adjusted earnings before interest and taxes of $3.9 billion, or $1.86 a share, in 2016.

GM has been weathering challenges from a global shortage of semiconductor chips, which has caused factory shutdowns and is expected to shave billions off the industry’s earnings in 2021.

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