General Motors (NYSE:GM) closed out a strong 2024 with fourth-quarter results that beat Wall Street's expectations. The U.S.-based automaker also predicts another good year in 2025 with even better bottom-line results.
So investors might wonder why the stock tanked by more than 10% on Tuesday morning after that report came out. GM shares remained down by 10.4% as of 11:44 a.m. ET.
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One reason for the stock's sharp decline was that GM stock soared nearly 50% in 2024. But it's what the company didn't say in its fourth-quarter report that has investors locking in profits.
GM stock still has one big buyer
The automaker reported $2.5 billion in operating profits for the quarter. Its $14.9 billion in operating profit for the year was at the high end of the company's latest guidance range. Net income was negatively impacted, though, from restructuring charges related to its China business and charges taken to close its Cruise robotaxi business.
The company provided strong guidance suggesting that its net income will approximately double in 2025. Its prediction for operating profit of $14.7 billion at the midpoint of its range was also well ahead of Wall Street's estimates.
But there was a bit of a catch in that optimistic guidance. GM didn't consider the impacts of potential changes that could come from the Trump administration this year. While it makes sense not to get ahead of decisions that have yet to materialize, many believe that Trump will eliminate the federal electric vehicle (EV) tax credit in 2025, which would raise their effective prices for consumers and reduce demand. President Trump has also asserted that he will soon impose 25% tariffs on imports from Canada and Mexico, which could have an immediate material impact on GM's business, forcing it to raise vehicle prices. Factories in those nations provide numerous parts to U.S. automakers, and some auto assembly plants are located in them as well.
Yet even with those potential downsides, there has been one big buyer of GM stock. The company itself has been repurchasing shares at a rapid pace, reducing its share count by more than 25% over the last three years.
Management did not provide an update on its capital return plans, though. That additional lack of clarity helped convince some shareholders to sell the stock Tuesday morning.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
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