General Motors shares gain after truck sales deliver big earnings beat in third quarter

General Motors on Thursday reported third-quarter earnings that beat Wall Street expectations, thanks to its highly profitable trucks and SUVs in North America.

Shares of the automaker jumped more than 7% during premarket trading before leveling off to a 1% gain at midday.

Here are the numbers:

• Adjusted EPS: $2.83, vs. $1.38 expected, based on average analysts’ estimates compiled by Refinitiv

• Revenue: $35.48 billion, vs. $35.51 billion expected

GM declined to give new earnings guidance for the year, citing a number of “moving pieces” such as potential stimulus and the coronavirus pandemic. GM CEO Mary Barra said the fourth quarter isn’t expected to be as strong as the third quarter. She downplayed the possibility that the uncertain outcome of the presidential election could hurt sales for the rest of the year.

“When we look at the election, we think the extended length of time to finalize the vote count was anticipated given the unique circumstances coming into this election,” Barra said during a media call Thursday morning. “There are a lot of moving pieces right but we’re hopeful that we’ll continue to have a strong recovery that we’ve seen in the United States and in China.”

GM’s North American operations earned $4.37 billion in the third quarter, up 44% from a year earlier, despite its U.S. sales declining 9.9% during the period. The company reported a 15% pretax profit margin for the quarter. Earnings for its international operations were in the black with pretax earnings of $10 million.

John Stapleton, GM’s interim CFO, said the automaker’s sales in the U.S. and China are “recovering faster than many people expected, and GM is benefiting from robust customer demand for our new vehicles and services, especially our full-size pickups and SUVs.”

Barra said the automaker is working to increase production of its trucks, saying an announcement is expected “very shortly” but declining to elaborate.

“We are always working to eek out every single truck we can possibly produce,” she said. “I’d just ask you to stay tuned. You will hear more about that very shortly.”

Net income rose 74% to $4.05 billion from $2.35 billion during the third quarter of 2019.

GM repaid $5.2 billion of its revolving credit facilities during the third quarter, and an additional $3.9 billion in October. The company said it expects to repay the balance by year-end “while maintaining a strong cash balance.” GM’s automotive liquidity was above its target, ending the third quarter at $37.8 billion.

Then-CFO Dhivya Suryadevara told investors in July that the automaker expected the third quarter to be “slightly stronger” than the fourth quarter.

Suryadevara, who unexpectedly left GM for digital payments company Stripe in August, said if the monthly sales pace during the second half of the year was 14 million, investors should expect a pretax profit of $4 billion to $5 billion through the fourth quarter. In that scenario, GM expected to generate free cash flow of $7 billion to $9 billion. Suryadevara declined to release official guidance at the time, citing fluidity due to the coronavirus pandemic.

Cox Automotive estimated the U.S. sales pace at 15.3 million in the third quarter, which should allow GM to outperform those projections.

GM reported an adjusted pretax profit of $3 billion, or $1.72 earnings per share, in the third quarter of 2019. Revenue was $35.47 billion.

Both Ford Motor and Fiat Chrysler beat Wall Street’s expectations on better-than-expected demand for trucks and SUVs in North America. Those are segments GM has substantial market shares of as well.