GM plunges 8% as $1.3 billion in recall costs lead to 2nd-quarter earnings miss
- GM shares sank 8% on Wednesday following a second-quarter earnings miss by the automaker.
- GM had $1.3 billion in warranty and recall costs, part of which stemmed from Chevy Bolt recalls to address fire risk.
- GM raised its 2021 adjusted earnings projection to a range of $5.40-$6.40 a share.
General Motors stock tumbled Wednesday, trading among the worst price performers on the S&P 500, after the auto maker's second-quarter earnings fell short of expectations even as the company raised its full-year outlook.
The company's earnings report released early Wednesday included $1.3 billion in warranty and recall expenses, with $800 million related to recalls of thousands of Chevy Bolt electric vehicles to address fire risk. GM posted adjusted earnings of $1.97 a share, less than the $2.23 a share expected in a Refinitiv poll of analysts.
GM shares dropped 8.4% to $53.01, the lowest price since early March. The stock this year had gained about 27% and has more than doubled since the year-earlier period.
Revenue of $34.17 billion was higher than the estimated $30.9 billion and more than doubled from $16.78 billion a year ago.
The company raised its 2021 guidance based on its performance during the first half of the year, during which it said it gained significant retail market share in the full-size pickup segment in the US. It also said high prices for used vehicle prices because of low inventories of new vehicles drove continued record results at GM Financial, its auto financing arm.
GM now expects 2021 adjusted earnings of $5.40 to $6.40 a share, up from its previous outlook of $4.50 to $5.25 a share.