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A dirty secret for market success
There’s one phrase that gets investors giddy and excited while also triggering ire and criticism from figures like United Auto Workers President Shawn Fain: stock buybacks.
As much as it is a dirty tactic by the white-collar side of automakers, buybacks make all the difference when it comes to the number next to the ticker.
Ginesin noted that GM executives took a more “balanced approach,” directing a larger amount of cash flow into stock buybacks, which has positively impacted the company’s earnings.
“GM reported a stellar quarter in late July with [earnings per share] up 60%,” Ginesin said. “The accretive buybacks have helped bolster EPS with outstanding shares reduced by 17%, from 1.37 billion to 1.12 billion in the past year.”
Although Ginesin mentions that buybacks are not among GM’s top priorities, he feels that if GM continues its business success and its stock price doesn’t reflect it, “the percentage of shares they’re buying quarterly can remain the largest of any company in the S&P 500.”
More Business of EVs:
An EV-heavy, but focused game plan for consumers
A key distinction that sets GM apart from Detroit rivals like Stellantis (STLA) and Ford (F) , is its relatively smoother rollout of electric vehicles than its contemporaries.
Ford has dramatically changed its EV-focused outlook very recently. In a move that will cost the company billions, the Blue Oval is focused more on hybrid models of its bread-and-butter offerings, while its EV strategy focuses on smaller vehicles.
Meanwhile, Stellantis is aggressively cutting the fat from its North American operations while dealers express doubts about the EVs they will tasked to sell to consumers.
Though GM laid off more than 1,000 workers at its software and services arm, it is still on the greener side of the grass when it comes to its product offering.
While Ginesin pointed out that “GM wasted vast amounts of capital creating buzz for their EVs before they were available,” the effort is having an impact. The cars appeal to a wide array of buyers, with “54% of EV purchases” coming from first-time GM buyers, all while it avoids a Tesla-style nightmare with inventory.
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