General Motors Stock Price Upside is Limited Amid Outlook Revision

General Motors (NYSE: GM) stock price is extending the upside momentum after experiencing a selloff due to strike. The upside momentum is receiving support from stronger than expected results in the third quarter. The company is experiencing substantial revenue growth from U.S. markets; revenue from international markets is declining year over year.

The company has topped both revenue and earnings estimate for the third quarter. General Motors stock price soars more than 4% after the Q3 earnings release. GM shares are currently trading around $38, down from 52-weeks high of $42 a share.

Q3 Beat added to General Motors Stock Price

GM beats revenue and earnings estimates by $260 million and $0.34 per share in Q3. It says higher revenue growth from U.S. markets helped in offsetting lower revenue from international markets.

The dealerships delivered almost 739,000 vehicles in Q3, up 6% from the year-ago period. The revenue growth is driven by all-new full-size pickups along with a fresh lineup of crossovers.

Its crossover sales increased 29% year over year in the third quarter. GM is likely to launch next-generation full-size SUVs in 2020. It’s North American adjusted EBIT stood at $3.0 billion.

Despite lower earnings compared to the previous period, the company appears in a strong cash position to invest in growth opportunities. Its automotive free cash flow was standing around $3.76B in the third quarter.

Lower Outlook Could Negatively Impact GM Share Price

The company has declined its outlook for the next year due to changes in its business strategy.

“Due to changes in the company’s transformation plan, GM lowers its 2020 cost savings target to $4.0B to $4.5B. EPS of $4.50 to $4.80 is anticipated,” CEO Mary Barra said.

Previously, the company was expecting adjusted EPS around $6.50 to $7 a share.  Automative free cash flows are likely to hover around $0 to $1 billion in fiscal 2020. Overall, General Motors stock price has limited upside potential.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.

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