Shares of General Motors are surging higher by about 5% this morning after the Detroit automaker crushed expectations across the board, beating both Wall Street’s top and bottom line expectations to wrap up their full year 2022.

The company also issued strong guidance for the upcoming year. Shares are up about $1.70 and trading near $38 as a result.

Here are the numbers behind the full report, per Bloomberg: 

• Adjusted EPS $2.12, estimate $1.67

• Net sales and rev. $43.11 billion, estimate $40.51 billion

• Cruise net sales and revenue $25 million, estimate $62.6 million

• Automotive net sales and revenue $39.83 billion, estimate $38.1 billion

• GM Financial net sales and revenue $3.28 billion, estimate $3.35 billion

• North America adjusted Ebit $3.65 billion, estimate $3.31 billion

• International operations adjusted Ebit $272 million, estimate $286.9 million

• Cruise adjusted ebit loss $524 million

• GM financial adjusted EBT $775 million

• Adjusted automotive free cash flow $4.46 billion

• Adjusted Ebit $3.80 billion, estimate $3.46 billion

And guidance for the upcoming year, per Bloomberg:

• Sees adjusted EPS $6.00 to $7.00, estimate $5.70 (Bloomberg Consensus)

• Sees adjusted auto free cash flow $5.0 billion to $7.0 billion

• Sees adjusted Ebit $10.5 billion to $12.5 billion, estimate $10.35 billion

• Sees net income $8.7 billion to $10.1 billion, estimate $8.16 billion

In Mary Barra’s letter to shareholders, she wrote: “We expect that our momentum will help us deliver strong results once again in 2023. In fact, we have all the essential ingredients to deliver EBIT-adjusted in a range of $10.5 billion to $12.5 billion thanks to our strong operating performance.”

She called the coming year a “breakout” year for the company’s Ultium battery platform: “2023 will also be a breakout year for the Ultium Platform. By leveraging U.S.-made battery cells produced by our Ultium Cells joint venture and the scalability and flexibility of the Ultium Platform, we are accelerating production of the Cadillac LYRIQ, GMC HUMMER EV and BrightDrop Zevo 600, and we will launch exciting vehicles like the Chevrolet Silverado EV, Blazer EV and Equinox EV. This keeps us on track to produce 400,000 EVs in North America from 2022 through the first half of next year.”

Barra continued: “Our EVs are transformational in so many ways. We’re earning new customers. Our investments are creating new jobs. We’re moving closer to a world with zero crashes, zero emissions and zero congestion, and we believe our R&D, supply chain, manufacturing scale and distribution network will unlock the profitability of EVs.”

CFO Paul Jacobson said on Tuesday morning: “We think the underlying business is going to be pretty consistent with what we saw last year, and I think that’s a slightly more bullish statement than where most of the market is.” 

He added that demand and pricing “remain strong” for the automaker. GM says it will also put into place a $2 billion cost cutting plan for the next two years and to expect “some” headcount attrition – but he says the company isn’t planning layoffs. 

Focus will also continue to be on margins at the company, as the Q4 results shows “signs of a margin squeeze”, according to CNBC: “GM’s net income slipped last year, down by less than 1% from the full year 2021 to $9.9 billion, with a profit margin that was off 1.6 percentage points to 6.3%. Its adjusted profit margin was 9.2%, down 2.1 percentage points compared with the previous year.”

Bloomberg also pointed out some of the company’s additional corporate initiatives:

• GM to Make A $650M Equity Investment in Lithium Americas
• GM, Lithium Americas to Develop Thacker Pass Mine in Nevada
• Thacker Pass Production Projected to Begin in 2H 2026
• GM: Investment Will Be Split Between Two Tranches
• GM: Escrow Release Is Expected to Occur No Later Than End 2023
• GM: We Are Gaining Considerable Market Share in Fleet Business
• GM Sees Capital Spend $11B-$13B for Year
• On track to open 4 battery cell plants targeting 160 GWh of capacity
• The company expects its core auto operations to perform at a consistently strong level in 2023, with full-year net income attributable to stockholders of $8.7 billion-$10.1 billion, EBIT-adjusted of $10.5 billion-$12.5 billion, and EPS-diluted and EPS-diluted-adjusted of $6.00-$7.00.

Case-Shiller’s latest data (for November) showed US home price acceleration continued to slow (-0.54% MoM – slightly stronger than expected) for the 5th straight month.

Source: Bloomberg

This slowed the annual growth in the 20-City Composite index to 6.77% YoY – its slowest since Sept 2020.

“As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices,” Craig J. Lazzara, managing director at S&P Dow Jones Indices, said in statement.

“Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”

More broadly, the S&P CoreLogic Case-Shiller National Home Price index rose 7.69% YoY in Nov., smallest gain since Sept. 2020, after rising 9.23% in prior month

Every one of the major cities saw home prices decline MoM…

Miami, Tampa, and Atlanta reported the highest year-over-year gains among the 20 cities surveyed but we note that San Francisco home prices are now lower (-1.57%) year-over-year…

That is the largest price drop since at least 2012…

Several days after blowout earnings by its biggest competitor Chevron, this morning US E&P giant Exxon Mobil posted blowout Q4 and full year numbers, when it reported $59 billion in adjusted profit for 2022, taking home more than $6.7 million per hour last year, and setting not only a company record but a historic high for the Western oil industry. 

That’s right: Exxon’s full-year profit, excluding one-time items, jumped 157% from 2021 to $59.1 billion, far exceeding the driller’s prior record of $45.2 billion in 2008 when oil hit $142 per barrel, 30% above last year’s average price, and which at the time marked the biggest in US corporate history. Deep cost cuts during the pandemic helped supercharge last year’s earnings.

On a quarterly basis, Exxon surpassed expectations for the ninth time in 10 periods, posting adjusted fourth-quarter profit of $3.40 a share that was 11 cents higher than the median estimate by analysts in the Bloomberg Consensus. This translated into $14 billion in fourth quarter profit excluding charges, 60% more than the same period last year but down almost 25% from the previous quarter as oil prices eased and some operations suffered from cold-weather related outages. Here is a snapshot of what the company reported for Q4:

• Revenue $95.4BN, beating consensus expectations of $$94.7BN
• Adjusted EPS of $3.40, beating consensus expectations of $3.29.
• E&P was the largest driver of the beat across US/International, as well as International Energy and Specialty products.
• Cash flow came in at $17.8 bn excluding working capital and asset sales, missing consensus expectations of $18.3 bn.

“Overall earnings and cashflow were up pretty significantly year on year,” Exxon Chief Financial Officer Kathryn Mikells told Reuters. “So that came really from a combination of strong markets, strong throughput, strong production, and really good cost control.”

Exxon said it incurred a $1.3 billion hit to its fourth quarter earnings from a European Union windfall tax that began in the final quarter and from asset impairments. The company is suing the EU, arguing the levy exceeds its legal authority.

Here is how the earnings look when compared side by side with the GS model:

And in more details:

• On a segment basis, relative to Goldman’s numbers (Buy reco, $120 PT) the company beat on E&P and R&M (Energy and Specialty Products), and was slightly below on Chemicals, and more in-line on Corporate.
• On the Upstream, XOM came in above GS estimates, with the US and International business above. XOM announced $8.8 bn for adjusted E&P worldwide, versus our expectations of $8.3 bn.
• Production was above GS expectations. XOM reported 3,822 Mboe/d versus our 3,703 Mboe/d forecast, and consensus of 3,772 Mboe/d. Digging deeper, liquids volumes came in above GS forecast driven by International. On the gas side, volumes came in above expectations in International.
• R&M (including both Energy Products and Specialty Products) was above GS estimates, with XOM reporting worldwide adjusted R&M earnings of $5.6 bn for 4Q22 versus our expectations of $5.2 bn. The variance was mainly driven by International, with US more in-line vs our estimates.
• The Chemicals segment came in slightly below our forecasts during the quarter driven by International. XOM reported $250 mn of adjusted earnings versus our ~$350 mn forecast.

Still, despite the blowout, record earnings, because XOM did not follow CVX in reporting a just as gargantuan stock buyback, some traders decided to punt the stock, at least in early trading when it dropped as much as 4% before recovering some gains. Instead of matching Chevron’s $75BN, XOM stuck with its previous guidance of $35BN in buybacks for the 2023-2024 period, although it is very likely that the company will have to boost this number.

Exxon also boasted its cash flow from operations soared to $76.8 billion last year, up from $48.1 billion in 2021.

Exxon’s spending on new oil and gas projects bounced back last year to $22.7 billion, up 37% from the prior year. The company increased outlays on discoveries in Guyana, in the top U.S. shale field, and on fuel refining and chemicals.

“The counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering,” Exxon Chief Executive Officer Darren Woods said in a statement.

The results may set up another confrontation with the White House. On Friday, President Joe Biden’s administration blasted oil firms for pouring cash into shareholder payouts rather than production. Windfall profit taxes are “unlawful and bad policy,” countered CFO Mikells. Slapping new taxes on oil earnings “has the opposite effect of what you are trying to achieve,” she said, adding it would discourage new oil and gas production.

The five supermajors are swimming in cash after a record 2022 but pressure is mounting on executive teams to satisfy Biden’s contradictory demands: investor appetite for bigger payouts and buybacks versus political outrage over windfall profits during a time of war and economic dislocation.

According to Reuters, oil majors are expected to break their own annual records on high prices and soaring demand, pushing their combined take to near $200 billion. The scale has renewed criticism of the oil industry and sparked calls for more countries to levy windfall profit taxes on the companies.

Chevron was excoriated by the White House and Democratics when it disclosed plans last week to funnel $75 billion to investors in the form of stock repurchases. Investors cheered.  Exxon had already expanded buybacks multiple times last year and already has signaled its intention to repurchase $50 billion of stock through 2024. Chief Executive Officer Darren Woods is likely to be probed on whether Exxon can increase the pace of buybacks again when he hosts a conference call with analysts at 8:30 a.m. New York time.

There are also signs that Wall Street, after a long hiatus, is once again keen to see oil explorers increasing crude output. As Bloomberg notes, Chevron executives faced multiple questions about growth plans last week, and several analysts noted their disappointment at the California-based company’s outlook for a flat-to-3% increase this year.

A slowdown in Chevron’s Permian Basin annual growth to 10% probably will be an “overhang” on the stock, Cowen & Co. said in a note to clients. That said, Exxon has less reason to be concerned about when it comes to growth than some of its peers. The company has a “differentiated upstream project queue” that should increase return on capital over the coming years, Goldman Sachs wrote in a Jan. 20 note.

The Texas oil giant has continued to invest in major projects in Guyana and the Permian region during the pandemic, which by Exxon’s own estimates should have the knock-on effect of driving production to the equivalent of more than 4 million barrels a day by 2027, up about 8% from current levels.

Alongside fossil-fuel growth, Exxon plans to ramp up spending on clean-energy investments by focusing on carbon capture, hydrogen and biofuels. The company cited the Biden administration’s Inflation Reduction Act as a key policy pillar that improves profitability of decarbonizing existing operations, but has said that more government support is needed for big projects such as its proposal to capture emissions from industrial facilities along the Houston Ship Channel.

The stock initially tumbled on lack of a buyback expansion, but has since recovered much of its losses.

Exxon’s Q4 earnings presentation is below (pdf link)

Despite double-digit inflation and Russia’s invasion of Ukraine, the Eurozone looks set to avoid recession as GDP grew 0.1% in the final quarter (against expectations of a 0.1% decline).

Only a few months ago, economists had forecast a deep recession and energy shortages.

But a less cold winter than feared, falling gas prices and generous government support have all helped avoid that scenario, helping the region to grow in each quarter of 2022 and by 3.5% over the course of the year.

While German and Italian output shrank, France and Spain recorded expansion. There was also stronger-than-anticipated data on Monday from Ireland.

“The Irish economy, propelled by the presence of multinational corporations, expanded by 3.5% contributing 0.1 percentage points to the euro-area figure and tipping the balance such that the bloc expanded overall,” said Jamie Rush, chief European economist at Bloomberg Economics.

Bert Colijn, senior economist at ING, the bank, said the region’s economy was showing “incredible resilience” in the face of the energy crisis triggered by Russia’s invasion of Ukraine.

“The worst scenarios for this winter have been avoided,” Colijn said.

“But the economy remains sluggish.”

While Lagarde and he lackeys can celebrate for now, the bloc isn’t out of the woods yet, as economists continue to predict output will dip in the first quarter.

The euro spiked lower early in the EU session, but has recovered most of that drop since…

The economy holding up better than feared means the ECB can stay focused on tackling high and persistent inflation.

With The Fed huddling in The Eccles Building and traders hyper-focused on any signs of ‘peak inflation’ (because that means ‘peak Fed tightness’), this morning’s Q4 US employment costs index rose 1.0% QoQ (slightly cooler than the +1.1% expected and down from the +1.2% QoQ in Q3)…

Source: Bloomberg

Labor costs have risen at least 1% for six straight quarters, extending what was already a record streak in data back to 1996.

As a reminder, Fed Chair Powell explicitly mentioned this signal, and while the quarterly changes are trending in the right direction, we note that the YoY rate of change rose to a new record 5.07%.

The ECI is notable in part because other recent wage data (the average hourly earnings data in the monthly payroll report) have pointed to a deceleration in wage growth.

The ECI could provide confirmatory or contradictory evidence of this recent trend for the wage story.

— Nick Timiraos (@NickTimiraos) January 31, 2023

Given the record rise in ECI YoY, we are not sure this is what The Fed wants to see…

Ukrainian Armed Forces are preparing battle plans along the frontline as a Russian spring offensive could be ahead. Western countries are sending main battle tanks and other vehicles to thwart the coming escalation in fighting.

Last week, President Biden announced 31 M1 Abrams main battle tanks (without secret armor) would be sent to Ukraine. Germany, Norway, Poland, and other NATO countries will send other tanks, including the Leopard 2. Even Morocco will send older T-72 series tanks, currently in use in the war-torn country. 

All of these ‘donated’ tanks sound great, but if they don’t make it to Europe and race across the battlefield by spring, then the Ukranians might have trouble repelling the Russians. 

A press release via the US Transportation Command (USTRANSCOM), a segment of the US military responsible for transporting equipment worldwide, detailed last week that a large roll-on/roll-off vessel named “ARC Integrity” loaded 60 Bradley Fighting Vehicles destined for Ukraine. 

https://t.co/6Be9DY1HI8 pic.twitter.com/JjQPUomPdP

— OSINTtechnical (@Osinttechnical) January 30, 2023

As of Monday, and according to USTRANSCOM’s press release noting the vessel’s name, data via MarineTraffic shows ARC Integrity is full steam ahead in the Atlantic Ocean and will arrive at the Port in Southampton, England, on Feb. 7. 

USTRANSCOM uses large ro-ro carriers to transport all sorts of military equipment worldwide. These fighting vehicles are being loaded at ports along East Coast and Gulf Coast states. 

By Tom Kool of OilPrice.com,

Saudi Aramco has signed more than 100 agreements and memoranda of understanding (MoUs) worth $7.2 billion to support the local industrial and manufacturing sectors, the Saudi oil giant said on Monday as the Kingdom looks to have more local content in the industrial supply chains.

The signing of the deals took place during the 7th edition of the In-Kingdom Total Value Add (iktva) Forum and Exhibition, a program to boost local content in supply chains. The program achieved 63% local content in 2022, up from 35% in 2015 when it was launched, Saudi Aramco said in a statement.

The event was attended by Saudi Arabia’s Minister of Energy, Prince Abdulaziz bin Salman.

During the event, Aramco launched its wholly owned subsidiary Aramco Digital Company, which aims to accelerate digital transformation within Saudi Arabia and the Middle East and Africa (MENA) region.

The forum also awarded winners in several categories for in-house value added, including major oilfield services operators. SLB, formerly Schlumberger, won the best in overall iktva services award, Halliburton won in training and development, Baker Hughes in supplier development, and Siemens Energy best overall iktva for manufacturing.

The iktva program encourages the establishment of regional headquarters in the Kingdom, Saudi Aramco said.

In 2021, Saudi Arabia’s authorities said that companies willing to do business with Saudi government firms or such owned by the state should have their regional headquarters in Saudi Arabia by the end of 2023. Earlier this month, Saudi Arabia eased some of those rules about regional headquarters and allowed companies with small foreign operations to continue working with customers affiliated with or owned by the Kingdom.

The move to boost local content and strengthen manufacturing and industry is part of Saudi Arabia’s Vision 2030 to diversify its economy, which depends a lot on oil production and exports.

Back in August 2022, repo plumbing guru Zoltan Pozsar published a fascinating chart showing how “$2 Trillion Of German Value Depends On $20 Billion Of Russian Gas” or specifically, how Germany had applied some 100x leverage – much more than Lehman – on cheap commodities, and mostly Russian gas, to cheaply run its export-driven economic miracle for decades.

And with Russia’s cheap gas now gone for the foreseeable future, so is Germany’s tremendous operating leverage.  Which means profit margins will be hammered for years to come.

As proof look no further than a study published Monday by Allianz Trade which cited contract expiries and delayed wholesale pricing effects, and which according to Reuters found that German industry is set to pay about 40% more for energy in 2023 than in 2021, before the energy crisis triggered by Russia’s invasion of Ukraine.

“The large energy-price shock still lies ahead for European corporates,” said Allianz Trade, the credit insurer that changed its name from Euler Hermes last year.

As a reminder, in 2022, higher corporate utility bills were contained as long pass-through times from wholesale markets and government interventions mitigated the immediate hit from surging prices as Russia curbed fuel exports to the West. The resulting budget deficits were promptly funded by the ECB, which meant that for all the posturing, Christine Lagarde was directly funding Putin’s cash build up.

But the pass-throughs are ending, which means that price increases will soon hit corporate profits across Europe by 1-1.5% and lead to lower investment, which in Germany’s case would amount to 25 billion euros ($27 billion), Allianz Trade estimated.

The silver lining is that German companies’ finances are robust, while a state-imposed gas price cap would help (unless it makes things much worse).

At the same time, fears the crisis could lead to de-industrialisation and a loss of competitiveness against the United States were overdone, because labor costs and exchange rates have a bigger impact on manufacturing than energy prices, the study said. Also, while exporters were losing market shares in areas such as agrifood, machinery, electrical equipment, metals and transport, the relative beneficiaries tended to be Asian, Middle Eastern and African, not American, it added.

Meanwhile, the economic ministry said on Saturday that the German government’s one-off payment to help private households and small businesses with gas prices – the first stage of a package that will be complemented with retroactive price caps kicking in in March – has cost 4.3 billion euros so far.

Berlin has earmarked 12 billion euros for the payment, but the ministry said 4.3 billion euros was not the final cost as many eligible firms had not yet applied for the aid. They have until the end of February to apply; and judging by the huge losses they still face, they will.

Authored by Paul Joseph Watson via Summit News,

The Metropolitan Police in London is recruiting officers who are illiterate, can barely write English, and may have a criminal record in order to meet diversity quotas, it has been revealed.

Yes, really.

A 2014 promise to have 40% of the force be represented by ethnic minorities by 2023 has fallen well short, with just 17% of officers being from ‘diverse’ backgrounds.

Matt Parr, the head of the organization responsible for inspecting British police forces, told the Telegraph that London, “which will likely be a minority white city in the next decade or so, should not be policed by an overwhelmingly white police force.”

In addition to the optics of a largely white police force being wrong, Parr said it was also, “operationally wrong, because it means that the Met does not get insight into some of the communities it polices and that has caused problems in the past. So we completely support the drive to make the Met much more representative of the community it serves than it is at the moment.”

That drive has however led to officers being hired who struggle to even write up basic crime reports.

“Applicants to the police who can barely write in English are being accepted by the Met in an attempt to improve diversity, one of His Majesty’s Inspectorate of Constabulary has warned.”https://t.co/5RJETVG7nh

— Tony Dowson (@TonyDowson5) January 27, 2023

“They are taking in significant numbers of people who are, on paper at least, functionally illiterate in English,” said Parr, adding that the Met was “recruiting the wrong people” and that the diversity push had “lowered standards.”

However, Parr also noted that it was a good thing that the Met was “taking a risk” by hiring young black men who may have criminal records.

David Spencer, the head of the think tank Policy Exchange and a former Metropolitan Police officer, said that the diversity drive had lowered standards.

“There is a tension between volume, quality and diversity and something has to give,” Spencer explained. “Someone has to ask what is the most important of those three things and you have to be really careful because once you have recruited someone they are possibly going to be there for the next 30 years.”

As we previously highlighted, police resources in London are so stretched that major department stores have given up on calling them to catch shoplifters.

Car theft in London has effectively been decriminalized, with just 277 out of 55,000 offences being solved by Scotland Yard, a 0.5% success rate.

However, there still appears to be plenty of resources available to interrogate people for posting offensive social media posts.

“I’d like to report a burglary.”pic.twitter.com/4arXP1WDdK

— Paul Joseph Watson (@PrisonPlanet) January 26, 2023

*  *  *

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Within days of the US and Germany approving heavy main battle tanks for Ukraine, including future deliveries of the advanced Abrams M1 and Leopard tanks, one Russian company has issued a bounty for their destruction. 

“A Russian company has offered a cash bounty of up to 5 million rubles ($71,648) for the destruction or capture of Western-made tanks recently promised to Ukraine by its European and American allies,” according to regional media reports.

Apparently the race will be on for Russian troops (or mercenaries, in the case of Wagner Group) to be the “first” – given the Yekaterinburg-based company Fores stipulated the $70,000+ reward for whoever destroys or captures the initial western tank, with a pay out of 500,000 rubles ($7,164) for each subsequent tank.

Fores said it is motivated by a patriotic desire to support the national army: 

“The decision to transfer western tanks to Kyiv indicates that NATO is no longer supplying Ukraine with defensive weapons only and means that we need to consolidate and support our army,” Fores said in a statement.

It comes after the Kremlin said that tanks provided by Washington will “burn” – and that ultimately they will make no different for Ukraine’s chances on the battlefield.

“I am certain that many experts understand the absurdity of this idea. The plan is disastrous in terms of technology,” Putin spokesman Dmitry Peskov said last Wednesday. “But above all, it overestimates the potential it will add to the Ukrainian army. These tanks burn just like all the others.”

Given that already the Ukrainian government is claiming to be involved in ‘fast-track’ talks with Western backers to receive fighter jets like the US F-16, we wonder how big a ‘bounty’ Russian companies will offer for airplanes.