GM Announces $10B Buyback, Will Up Dividend By 33% Next Year

General Motors (NYSE: GM) spiked more than 9% in the Wednesday premarket after the company unveiled a string of measures to restore investors’ trust. Most notably, the company announced a $10 billion stock buyback plan, a 33% quarterly dividend boost for 2024, and an improved 2023 guidance.

GM Revises 2023 Guidance

In a move aimed at regaining investors’ attention, General Motors unveiled a series of initiatives to offset the negative effects of a turbulent year marked by labor strikes and business plan setbacks. The carmaker’s shares surged over 9% ahead of Wednesday’s market open. 

Notably, the car manufacturer intends to boost its quarterly dividend in 2024 by 33% to 12 cents per share and launch an accelerated $10 billion stock buyback program. 

Furthermore, the company plans to reinstate its 2023 guidance to include an approximate $1.1 billion EBIT-adjusted blow caused by six weeks of labor strikes led by the United Auto Workers (UAW) union. The UAW initiated the strike of the Detroit Three car manufacturers in September, Ford, GM, and Stellantis, with the former reaching an agreement with the group last month.  

GM’s refined 2023 guidance encompassed several adjustments. The automaker expects its net income to land between $9.1 billion and $9.7 billion in fiscal 2023 and projected an adjusted EBIT of $11.7 billion to $12.7 billion. Adjusted earnings per share are anticipated to be $7.20 to $7.70, while adjusted automotive free cash flow is estimated to fall between $10.5 billion and $11.5 billion. 

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GM Underperforming S&P 500 in 2023 Amid UAW, Auto Market Headwinds

The latest batch of investor-oriented initiatives marks a much-needed motion of confidence for the automotive giant in a challenging overall year.

After reporting its Q3 earnings in October, the company pulled its guidance, citing uncertainty attributable to UAW negotiations and labor strikes. The company struck a tentative agreement with the union on October 30, ending the work stoppages.

Apart from this, GM also grappled with broader economic challenges and headwinds in the automotive industry as it struggled to normalize away from expensive vehicles and record profits. 

These issues and investors’ concerns have been reflected in GM’s stock price, which fell more than 14.5% since the start of the year. This marks a significant underperformance compared to the broader S&P 500, which gained over 19%, primarily thanks to the ongoing AI boom. 

With 2023 coming to an end soon, do you expect GM to have a better 2024 following the latest series of investor-focused initiatives? Let us know in the comments below.