2022 delivered an impediment course of situations for main automakers to drive via, together with semiconductor chip shortages and rising rates of interest, amongst different components. However you would not understand it from Common Motors‘ (GM -0.89%) fourth-quarter outcomes. The Detroit automaker is virtually printing cash proper now.

This is a fast take a look at what’s behind the better-than-expected earnings and why GM could be the perfect auto inventory to purchase.

Topping estimates

Common Motors reported a powerful fourth quarter with earnings per share of $2.12, effectively forward of Wall Road estimates of $1.69. It generated $3.8 billion in earnings earlier than curiosity and taxes (EBIT) from $43.1 billion in gross sales, which additionally simply topped estimates of $3.2 billion and $40 billion, respectively.

For the complete 12 months, GM posted a file $14.5 billion (EBIT adjusted) on income of $156.7 billion. Additionally spectacular was adjusted automotive free money circulate of $10.5 billion, in comparison with the prior 12 months’s $2.6 billion.

With such a bumpy street for automakers in 2022, what drove GM’s better-than-expected outcomes?

Large autos usher in large earnings

Certain, automakers usually desires to promote extra autos 12 months to 12 months, however extra importantly they wish to promote more-profitable autos. Throughout the automotive business, full-size vehicles and huge SUVs at present haul a bigger share of the earnings, and that is excellent news for GM as a result of its larger-vehicle portfolio is doing nice.

GM was the U.S. market chief in whole gross sales, full-size pickup truck gross sales, full-size and huge luxurious SUVs, and luxurious sports activities automobiles — all extremely worthwhile segments. In 2022, GM bought greater than 1.1 million full-size pickups, midsize pickups, and full-size SUVs, which is over 350,000 greater than the second closest competitor.

Additional, the automaker’s GMC model was the No. 1 premium truck model in 2022, and 46% of retail gross sales had been in big-ticket Denali or AT4 trims, serving to increase profitability. Large autos ought to proceed to generate large earnings within the business within the close to time period, however GM can also be engaged on its plan for a future with electrical autos (EVs) and autonomous driving autos.

The street forward

The primary issue that makes GM a superb automotive inventory to purchase now’s that the corporate was in a position to navigate troublesome waters in 2022 effectively and on the similar time advance its plans. GM is getting into the second section of its EV technique and can supply 9 fashions in 2023 that strategically hit standard automobile segments at a number of worth factors.

In the course of the first half of the 12 months, buyers can anticipate the Chevrolet Silverado EV and the GMC Hummer EV SUV to hit the roads. Within the second half, the automaker will roll out the Chevrolet Blazer EV and Equinox EV. Late 2023 will carry the Corvette E-Ray, the primary electrified all-wheel-drive Corvette. As manufacturing ramps up and EV gross sales proceed to develop, GM expects as much as mid-single-digit margins on its EV lineup by 2025 and for EVs to generate $50 billion of its whole $225 billion estimated income in 2025.

GM’s EV technique goes effectively past launching fashions. The automaker invested $650 million collectively with Lithium Americas to develop the most important recognized provide of lithium within the U.S. and expects it can assist manufacturing of as much as 1 million EVs per 12 months. The funding will assist it safe its provide chain and higher handle battery cell prices.

Past EVs

GM’s development drivers embody different areas as effectively. Traders usually overlook its BrightDrop enterprise, which provides electrical services to companies that ship merchandise to last-mile shoppers. The Detroit automaker estimates BrightDrop will generate $1 billion in income in 2023.

And let’s not overlook Cruise, GM’s autonomous driving entity, which has lately expanded past San Francisco into Phoenix and Austin and is nearing 1 million absolutely driverless miles throughout roughly 300 all-electric autonomous autos.

GM finds itself in a fantastic place. It has performed effectively in a troublesome 12 months within the automotive business, raking in earnings due to its profitable portfolio of bigger SUVs and vehicles, whereas making ready a slate of EV launches for 2023. It has diversified its income streams with companies like BrightDrop and continues to construct for the way forward for driverless autos.

GM is a forward-thinking firm with a safe provide chain, secure of extremely worthwhile autos, and a transparent imaginative and prescient for the longer term. It might be among the best automakers to put money into and nonetheless be capable to sleep soundly at evening.