General Motors shares have risen 13.1% in a month amid the company's continued restructuring efforts in China, growth in software and digital business and expansion of its business beyond traditional vehicle manufacturing. In the second quarter of 2026, General Motors' adjusted earnings beat the Zacks Consensus Estimate, and the automaker raised its full-year 2026 adjusted EBIT guidance, citing strong operating performance, better pricing and warranty assumptions and a modestly improved commodity outlook. GM outperformed the broader Zacks Auto, Tires and Trucks sector and the Zacks Automotive - Domestic industry's decline of 8% and 12.6%, respectively, and also outperformed its peers, Ford Motor Company and Stellantis N.V., whose shares lost 0.1% and 3.9%, respectively, during the same period. The company's biggest strength remains its North American truck and SUV business, with GMNA EBIT-adjusted margin rising to 8.6% and reaching 9.3% for the first half, and it raised 2026 adjusted EPS guidance to $12-$14 while expecting 2027 results to exceed 2026. GM's restructuring efforts in China are paying off, with China equity income improving to $83 million in the second quarter and $248 million in the first half of 2026, up from $71 million and $116 million, respectively, a year earlier, and the company expects the China business to remain profitable. GM is steadily transforming its software business into a meaningful profit driver, expecting more than $3 billion of recognized revenues and deferred revenues approaching $7.5 billion in 2026, and it plans to add about one million subscribers and exceed 850,000 Super Cruise subscribers by year-end. The company is also expanding into businesses beyond traditional vehicle manufacturing, including GM Energy, GM Defense and GM Insurance, which diversify its revenue streams and create multiple long-term growth opportunities. However, GM continues to face elevated costs from commodities, logistics and DRAM components, expecting commodity inflation of $1.2-$1.7 billion in 2026 and maintaining its estimate for gross tariff exposure of $2.5-$3.5 billion this year, while preparing for several major product launches that bring short-term risks, including an anticipated year-over-year production headwind of roughly 35,000 units during the transition. From a valuation perspective, GM appears undervalued to the industry while it appears overvalued compared to its peers, trading at a forward sales multiple of 0.4, lower than the industry's 3.1, while Ford is trading at 0.31 and Stellantis at 0.11. The Zacks Consensus Estimate for GM's 2026 EPS has moved up 47 cents in the past 30 days, while for 2027, it moved up a penny in the past seven days, and investors who currently hold this Zacks Rank #3 (Hold) stock may be better off retaining their positions.
