Bernstein downgraded Common Motors (NYSE:) from Outperform to Market-Carry out in a notice Monday, citing rising earnings headwinds and potential capital necessities.

In response to the agency, GM’s inventory has surged by 85% since November 2023, because of robust North American efficiency and aggressive shareholder returns, together with a $10 billion accelerated share repurchase (ASR) in late 2023 and an extra $6 billion buyback in mid-2024.

“Our data signals rising earnings headwinds, and we think there is a risk the company will announce additional capital requirements during its October CMD,” stated analysts at Bernstein.

Bernstein has decreased its 2025 earnings per share (EPS) forecast for GM by 8% to $8.23, pushed by a number of key components.

First, the U.S. stock buildup is predicted to create pricing pressures subsequent 12 months. Second, delays in ramping up electrical automobile manufacturing and continued losses from GM’s autonomous automobile division, Cruise, are anticipated push earnings headwinds into 2025. Worldwide enterprise challenges are additionally including to the stress.

Bernstein is especially involved in regards to the upcoming October Capital Markets Day (CMD), the place GM will possible present updates on its electrical automobile and software program methods, in addition to its Cruise division.

The analysts concern the updates may include extra capital necessities, which might negatively impression free money movement (FCF).

Bernstein has barely elevated its capital expenditure forecast to the upper finish of GM’s steering, additional lowering its 2025 FCF estimate to $6 billion.

Because of this, the agency has lowered its projection for shareholder distributions between 2025 and 2027 by 17% to round $10 billion.

Given the dangers of declining earnings and better funding wants, Bernstein believes GM’s outlook has shifted. The analysts preserve their 6.5x next-twelve-month price-to-earnings a number of, resulting in a brand new goal price of $53, down from $54.50.