General Motors crushed Wall Street earnings estimates as it returned to profitability amid strong demand for its high-margin full-sized pickups and SUVs.
The largest U.S. automaker reported Thursday that net income rose 74% to $4 billion in the third quarter and adjusted earnings increased 65% to $2.83 per share. Analysts had expected earnings of $1.38 per share.
In the prior quarter, GM lost $806 million as the coronavirus pandemic drove a 34% decline in vehicle sales in the U.S.
Revenue was essentially flat at $35.5 billion in the third quarter, matching forecasts, and the number of cars sold worldwide fell 4%. But GM’s profit margin jumped to 14.9% from 8.4% a year ago.
“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,” interim CFO John Stapleton said in a news release.
“These strong fundamentals and the positive impact of our transformation and austerity measures are helping us to deliver solid earnings, generate significant cash, and quickly repay the debt we incurred during the early days of the pandemic,” he added.
According to the Detroit Free Press, GM’s vehicle sales “could have been better with bigger inventories of the profitable pickups and SUVs. Inventory has been problematic for GM this year because of the eight-week factory closure in the spring due to the pandemic.”
CEO Mary Barra said GM is working to increase the production of its trucks. “We are always working to eke out every single truck we can possibly produce,” she told reporters.
GM is in a position to make that investment in part because, despite the pandemic, it is still relatively flush with cash, generating $9.1 billion in cash flow from its auto operations during Q3 to leave it with $30.2 billion, up from $17.3 billion at the start of the year.
The company has also achieved its cost savings target of $4 billion since 2018, including $200 million in the quarter.
In trading Thursday, GM shares rose 5.2% to $37.06.