Al Root
General Motors stock was down Monday after catching a downgrade to Sell.
It's the tariffs. The company just got "punched by the tariff man."
Shares of the auto maker were off 4.5% at $42.19 in early trading, while S&P 500 and Dow Jones Industrial Average futures were down 2.6% and 2.2%, respectively.
The fallout from President Donald Trump's surprisingly high tariff rates continues to pressure the market in general, and a tariff-related downgrade pressured GM stock in particular.
Bernstein analyst Daniel Roeska cut his rating on GM stock to Sell from Hold. His price target dropped to $35 from $50.
"What were we waiting for? For the past six months, we've been cautious as U.S. policy uncertainties started to mount," wrote Roeska. "Now, with greater clarity, the outlook for GM is clearly unfavorable."
Import tariffs of 25% on cars are now in effect. Import tariffs on car parts are slated to go into effect in a few weeks.
Consumer sentiment is softening, and costs are rising. GM just got "punched by the tariff man," Roeska added. He wouldn't be surprised to see GM pause stock buybacks to conserve cash.
GM imports about 45% of the cars it sells in the U.S., according to Bloomberg, mainly from Mexico and Canada. GM will try to change sales mix and move some production into the U.S. by adding shifts at existing plants, but managing through tariffs will be difficult for everyone, including GM.
Roeska forecasts a more than 50% reduction in 2026 earnings. His new 2026 earnings-per-share estimate is below $5; his old estimate was $10.51.
Wall Street projects 2026 earnings per share of about $12, according to FactSet. GM earned $10.60 in 2024, and the current consensus estimate for 2025 is $11.40.
The reduction works out to about $6 billion in lost net income. GM will have work to do to keep the impact at that amount. GM's annual North American expenses total almost $160 billion, but tariffs could add multiples of $6 billion to that figure.
For Wall Street, the 2025 and 2026 estimates don't include a lot of tariff impacts. Analysts, for the most part, have been waiting for tariffs to take effect, and for some guidance from the companies.
With the downgrade, 10% of the analysts covering GM stock have Sell ratings. The average Sell-rating ratio for stocks in the S&P 500 is about 7%. The average Buy-rating ratio is about 55%.
A downgrade from Hold to Sell doesn't change the Buy-rating ratio. Almost 60% of analysts covering GM stock have Buy ratings.
The average analyst price target for GM stock is about $59.
Coming into Monday trading, GM stock was down about 18% since the Nov. 5 presidential election. Shares dropped 5% this past week.
Write to Al Root at allen.root@dowjones.com
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(END) Dow Jones Newswires
April 07, 2025 09:00 ET (13:00 GMT)
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