What Happened?
Shares of automotive manufacturer General Motors (NYSE:GM) jumped 7.3% in the morning session after the company announced that its Board of Directors had approved a $0.03 increase (+25%) in its quarterly dividend. On top of that, they also gave the green light to a new $6 billion share buyback program. These moves show management's commitment to return value to shareholders, and based on the stock's reaction, it looks like the market is on board with the strategy.
After the initial pop the shares cooled down to $48.49, up 3.7% from previous close.
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What The Market Is Telling Us
General Motors’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 29 days ago when the stock dropped 11.1% on the news that the company reported fourth-quarter 2024 earnings and provided guidance that assumes a stable policy environment in the US, thus failing to help investors shrug off concerns relating to the impact of regulatory measures.
A key concern is the Trump administration's potential plans to reduce incentives like tax credits, which have helped accelerate the demand for EVs. If these plans are implemented, both GM and other EV players may need to rethink their growth forecasts. A Berstein analyst added following the earnings release "In our view, the guidance for 2025 leaves no room for errors, and also does not include impact from regulatory changes in the U.S., especially on tariffs and BEV support."
On a more positive note, General Motors beat analysts' revenue expectations this quarter, and its full-year EPS guidance came in higher than Wall Street's estimates. Overall, this was a mixed quarter, which failed to clear up uncertainties.
General Motors is down 5.6% since the beginning of the year, and at $48.49 per share, it is trading 19.5% below its 52-week high of $60.20 from November 2024. Investors who bought $1,000 worth of General Motors’s shares 5 years ago would now be looking at an investment worth $1,515.
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