General Motors’ second-quarter results “looked fine on paper,” but deeper analysis reveals troubling margin erosion in its core North American operations, worsened by tariffs and a return to losses in its EV segment, according to a new research note from Bernstein.
The analyst Daniel Roeska raised his price target on GM shares to $41 from $36 on Monday, citing improved clarity on future tariffs.
However, he maintained an Underperform rating, warning that “normalized earnings may not return anytime soon.”
General Motors‘ shares closed 0.1% higher on Monday. After reporting its financial results, the stock fell by about 10% before recovering in the following sessions as major Wall Street firms commented on the second-quarter earnings.
“GM’s Q2/25 came in above consensus—adjusted EPS of $2.53 was 8% higher than the Street, and revenue beat by nearly $2 billion,” Roeska wrote. “But GMNA missed EBIT expectations by 7.5%, and margins fell 150 basis points quarter-over-quarter.”
While General Motors reiterated its full-year guidance and resumed share buybacks, Bernstein warned that hitting both EBIT and free cash flow targets will require more than favorable currency moves or isolated gains in its international operations.
“The core GMNA business is eroding under $1.1 billion in tariffs,” Roeska noted, adding that “BEVs return to cash burn mode.”
GM’s North American EBIT-adjusted margin fell to 6.1% in Q2 from 10.9% a year earlier, while adjusted automotive free cash flow plunged 46.6% to $2.83 billion.
“The FY25 targets now hinge on cost and capex cuts—not on top-line strength,” Bernstein said.
“The bigger issue? The market still sees this as transitory. But with no real relief on tariffs and BEV incentives rolling off in Q3, the margin story could get worse before it gets better.”
Despite the caution, Bernstein raised its 2026 earnings forecast, citing greater visibility into tariff impacts. Still, the firm concluded: “A decent print, but it gets harder from here.”
Deutsche Bank, Barclays, and Bank of America lowered last week their price target on the Detroit automaker while Citi and Wells Fargo increased it to $61 and $38, respectively.
GM reaffirmed its full year financial guidance despite uncertainty around US tariffs.
Yu lowered the firm’s price target on GM from $55 to $53, which implies a 8.4% upside potential on the stock, based on Tuesday’s close.
GM‘s automotive cash flow registered a sharp drop of nearly 40% year over year to $4.65 billion.
The automotive debt raised by $1.7 billion in the first half of 2025 to $17.2 billion, with liquidity falling from $35.5 billion to $34.7 billion in the first six months of the year.
General Motors lowered its 2025 financial guidance earlier this year, as it aimed for an adjusted EBIT of between $10—$12.5 billion, down from $13.7—15.7 billion.
By then, the Detroit automaker predicted a tariff impact of $4 billion to $5 billion — which was reaffirmed on Tuesday’s report.
Last week, GM announced it has halted plans to produce EVs in its Orion plant, where it will manufacture ICE vehicles instead, from “early 2027,” to help the automaker “meet continued strong customer demand.”
