The IMF’s GDP Forecast, GM’s Q4, and Amazon Breaks Up With iRobot
Editor’s Note: Welcome back to the Wednesday edition of Street Authority Insider… where we boil down some of the most interesting financial news topics of the week.
IMF Ups the GDP Growth Forecast
The International Monetary Fund (IMF) lifted its forecast for global gross domestic product (GDP) growth this year.
The IMF now expects the global GDP to grow by 3.1% in 2024. And the group expects the global economy to expand by a further 3.2% in 2025.
The IMF is crediting resilience in the U.S. economy, Chinese monetary policy, and improved performance in emerging market economies such as Brazil, Russia, and India for the higher forecast.
Despite ongoing geopolitical uncertainties, the IMF also thinks that the world will avoid plunging into recession this year. The group expects the U.S.’s GDP to grow by 2.1% in 2024. Meanwhile, Japan and the Euro Zone will see 0.9% growth. The U.K. is expected to grow by 0.6%.
“What we’ve seen is a very resilient global economy in the second half of last year, and that’s going to carry over into 2024,” IMF Chief Economist Pierre-Olivier Gourinchas said.
“This is a combination of strong demand in some of these countries, private consumption, government spending. But also — and this is quite important in the current context — a supply component as well.
“So very strong labor markets, supply-chain frictions that have been easing, and the decline in energy and commodity prices.”
General Motors Beats Q4 Expectations but Warns About EVs
General Motors (NYSE: GM) reported fourth-quarter earnings this week that soundly both Wall Street’s forecasts.
The Detroit automaker reported earnings per share of $1.24. This was better than the consensus estimate of $1.16, according to LSEG (the firm formerly known as Refinitiv).
In addition, General Motors also beat Wall Street’s estimates for revenue, with $42.98 billion versus the forecast $38.67 billion.
And net income attributable to stockholders came in at $2.1 billion, or $1.59 per share, compared to last year’s result of $2 billion, or $1.39 per share.
General Motors saw a slight quarterly revenue decrease on a year-over-year basis, with $42.98 billion, versus $43.11 billion in the year-ago quarter.
However, the Detroit-based company saw a 10% year-over-year revenue increase for 2023 as a whole. Full-year revenue reached $171.84 billion, with adjusted earnings before interest and taxes at $12.36 billion.
“As we begin 2024, I believe GM is well positioned for another year of strong financial performance,” CFO Paul Jacobson said on a call with reporters.
However, on the call, both he and CEO Mary Barra warned about slower-than-expected U.S. electric vehicle (EV) sales. Demand for EVs has largely missed expectations in recent quarters.
“Consensus is growing that the U.S. economy, the job market, and auto sales will continue to be resilient [in 2024], and at GM, we expect healthy industry sales of about 16 million units with the mix of EVs continuing to grow,” Barra said.
Amazon and iRobot Break Off Their Engagement
On Monday, Amazon (NSDQ: AMZN) called it quits with its planned acquisition of iRobot (NSDQ: IRBT).
The reason for the “breakup” was pretty obvious: A statement issued by both companies said that the deal had been canceled due to there being “no path to regulatory approval for the deal.”
The deal, which was first reported in 2022, originally valued iRobot, the maker of the Roomba robot
Shares of iRobot — whose CEO immediately stepped down — plummeted by 12% on the news. However, the company’s stock has been tumbling for years, losing more than 88% of its value since reaching a high above $130 in February 2021.
The European Commission launched an investigation into the Amazon/iRobot deal, and concluded that it would stifle the competition for rival robot vacuum cleaners on Amazon’s e-commerce platform.
“We’re disappointed that Amazon’s acquisition of iRobot could not proceed,” Amazon’s Senior Vice President and General Counsel David Zapolsky said. “This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable.”
Zapolsky also had some complaints about the EU’s tough stance on M&A activity. “Undue and disproportionate regulatory hurdles discourage entrepreneurs, who should be able to see acquisition as one path to success, and that hurts both consumers and competition — the very things that regulators say they’re trying to protect.”
Amazon will pay the Roomba maker $94 million in breakup fees.
iRobot had been one of the “winners” of the pandemic, as stay-at-home orders and trends created demand for the company’s cleaning technology products.
However, in the ensuing years, iRobot has been struggling with falling sales — thanks largely to growing competition in the robot vacuum space.
Has the Fed Achieved Its Soft Landing?
According to the U.S. Bureau of Economic Analysts, U.S. GDP grew at an annualized rate of 3.3% in the fourth quarter. That’s significantly higher than the 2% growth economists had expected.
In fact, the U.S. economy in 2023 proved to be more resilient than anyone could have expected. Even at the start of 2023, some analysts were forecasting that the county would fall into recession by the fourth quarter. That definitely didn’t happen.
At the same time that GDP has proven to be resilient, the Personal Consumption Expenditure (PCE) index — the Federal Reserve’s preferred price gauge — has shown that inflation has grown weaker and unemployment has remained low.
Take a look:
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