Key takeaways
- GM shares fall 5% despite stronger quarterly earnings
- Automaker authorizes $20 billion in new share buybacks
- Rising costs and production disruptions worry investors
General Motors (NYSE: GM) stock dropped nearly 5% on October 20 despite reporting a 22% increase in third-quarter adjusted operating profit and announcing a new $20 billion share repurchase program.
Shares traded near $78.67 during Tuesday's session, down approximately 4.9%, as investors focused on rising manufacturing costs and production disruptions rather than the automaker's stronger financial results.
According to GM's official earnings release, third-quarter revenue reached $50.02 billion, up 2.9% year over year, while adjusted earnings before interest and taxes (EBIT) increased 21.6% to $4.11 billion.
GM Announces $20 Billion Buyback as Profit Rises 22%
The automaker delivered adjusted earnings of $3.70 per share, a 32.2% increase from $2.80 a year earlier. Net income attributable to shareholders reached $3.34 billion, compared with $1.33 billion in the same quarter last year.
GM also generated $5.88 billion in adjusted automotive free cash flow, up 40%, supported by its profitable North American vehicle business.
The company simultaneously authorized a new $20 billion multiyear share repurchase program after completing its previous $6 billion authorization.
GM had 849 million outstanding shares at the end of September, down from 995 million at the end of 2024. Its aggressive repurchases illustrate how stock buybacks can increase earnings per share by reducing the number of shares in circulation.
However, the new authorization does not mean GM has already purchased $20 billion in additional shares. The program has no expiration date and can be suspended or discontinued.
Why Is GM Stock Falling Despite Strong Earnings?
Investors appear increasingly concerned about the automaker's profitability heading into 2027.
GM narrowed its full-year adjusted EBIT forecast to $14.5 billion–$15.5 billion from the previous $14 billion–$16 billion range. Adjusted earnings guidance now stands at $12.75–$13.75 per share.
Although the midpoint of both forecasts increased slightly, the company faces higher expenses for steel, aluminum, logistics and computer chips.
Reuters reported that commodity and logistics pressures could total approximately $2 billion this year, with similar exposure possible in 2027 if costs remain elevated.
The challenges also extend to production. GM expects temporary shutdowns as it prepares factories for redesigned Chevrolet Silverado and GMC Sierra pickups, reducing near-term truck deliveries.
Rising oil prices compound those pressures by increasing transportation expenses and potentially influencing consumers' vehicle preferences.
Those concerns also arrive amid broader stock market volatility, with investors increasingly focused on inflation, borrowing costs and corporate earnings guidance.
Can GM Stock Recover in 2027?
CEO Mary Barra remains optimistic about the company's long-term prospects, highlighting redesigned pickups, improved operating efficiency and expanding software revenue.
In her shareholder letter, Barra said GM expects software and services-related deferred revenue to approach $7.5 billion in 2026.
The company also anticipates Super Cruise adoption across its pickup portfolio increasing fourfold to fivefold next year.
GM's improved cash generation contrasts with the financing challenges facing some capital-intensive businesses, but stronger liquidity alone cannot eliminate operating risks.
