Al Root
The auto industry's first-quarter earnings are essentially in the books.
Most landed with a thud. General Motors was the exception. The reasons for that are important to understand -- and worth paying attention to if you are a stockholder.
GM, Ford Motor, Jeep-parent Stellantis, Tesla, and Rivian all reported better-than-expected numbers. Tesla reported better pricing and more subscriptions for its Full Self-Driving driver-assistance product. Rivian demonstrated solid cost controls. Stellantis was "steady," if not stellar, according to Oxcap analyst Stuart Pearson. GM and Ford raised full-year financial guidance by $500 million, with improved product mix offsetting inflation and tariff headwinds.
That tariff threat flared up again on Friday. President Donald Trump said he would increase tariffs on European car imports to 25%, up from 15%. That shouldn't impact U.S. domestic producers, but most car stocks were lower on Friday. The S&P 500 was up 0.4%.
Only GM stock was up, although the day isn't over. Rivian stock was down 7.4% in midday on Friday. Ford stock fell 1.3%. Tesla stock fell 3.6%. Stellantis shares fell 5.5%.
There are idiosyncratic reasons for each of the moves. Company-specific factors matter.
Tesla stock is all about Elon Musk and AI. Shares trade for a high-growth tech multiple of about 180 times earnings expected over the coming 12 months. Some days, it feels as if investors don't care if Tesla makes consumer vehicles at all.
Rivian is a money-losing EV start-up trying to ramp up production of its lower-priced models.
Stellantis is deep in turnaround mode after a disastrous few years.
Ford is confusing. There are fire incidents at a key aluminum supplier, guidance raises that are considered cuts, recalls, quality issues, and other things to worry about. Investors hate confusion.
GM is easier to understand. The company remains solidly profitable in an environment where demand is stable if not stellar. Management will plow excess cash flow into share repurchases. It is one of the best ways to capitalize on low price-to-earnings multiples in mature industries.
"We believe that repurchasing GM stock at the current valuation remains one of the most effective ways to deploy capital and create long-term value for our shareholders," said CFO Paul Jacobson on GM's first-quarter earnings conference call.
GM spent $800 million to retire 11 million additional shares in the first quarter.
GM has about 900 million shares outstanding. It had close to 1.5 billion at the end of 2021. The company has spent more than $27 billion since then buying back stock.
Late 2021 and early 2022 were also close to the peak of EV enthusiasm. (Tesla stock gained 743% in 2020 and 52% in 2021.) Since the end of 2021, GM stock is up about 30%, Ford is down about 40%, while the S&P 500 has gained 50%. However, GM's market value has dropped from about $88 billion to $69 billion over that span.
GM's stock price is up, while its market value is down. That is the power of stock buybacks.
Currently, GM stock has a free cash flow yield of about 14% based on 2026 guidance. Share repurchases are one way to ensure that value returns to shareholders.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 01, 2026 14:44 ET (18:44 GMT)
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