Shares of General Motors (GM) are under pressure on Wednesday after the company reported second-quarter earnings. While the automaker lifted its full-year profit outlook, GM said that the chip shortage is expected to continue weighing on production output. Commenting on the results, Credit Suisse analyst Dan Levy said he expected a negative stock reaction given a second half of the year outlook he called "significantly below consensus," an opinion shared by his peer at Wells Fargo.

RESULTS: General Motors reported second-quarter adjusted EPS of $1.97. This compares to consensus of $1.71 from Visible Alpha, $1.82 from FactSet, and $2.23 from Refinitiv's IBES data. The automaker also reported revenue of $34.2B, compared to FactSet's consensus at $29.9B. GM noted that $1.3B in warranty recall costs, including $800M related to the Chevrolet Bolt EV, dragged down earnings. The electric vehicle has been recalled twice in the past year due to fire risks.

Additionally, General Motors raised its full-year 2021 adjusted earnings per share view to $5.40-$6.40 from $4.50-$5.25. GM also raised its full-year 2021 net income view to $7.7B-$9.2B, and EBIT-adjusted guidance to between $11.5B-$13.5B versus a prior view of net income of between $6.8B-$7.6B and EBIT-adjusted of between $10B-$11B. GM noted that the semiconductor shortage is "fluid," but said it expects supply chain challenges to continue. Regarding the GM Bolt recall, the company said that it doesn’t impact new Bolt EV, EUV, and Ultium cells.

'RESET ON EXPECTATIONS': Wells Fargo analyst Colin Langan kept an Overweight rating and a price target of $67 on General Motors shares after the company reported second-quarter earnings per share of $1.97, beating Visible Alpha and FactSet consensus figures but missing his own estimate of $2.28. GM preannounced that first half of 2021 adjusted EBIT would be $8.5B-9.5B and it ended at $8.5B, the low end of the preannounced range, noted Langan, who also pointed out that the automaker raised its fiscal year adjusted EBIT and adjusted EPS guidance. Despite the headline beat and raise, he expects the stock to trade down "modestly." Both the second-quarter beat and a guidance increase were likely expected given the strong second-quarter preannouncement, he argued.

Also commenting on General Motors' results, Credit Suisse analyst Dan Levy said he expected a negative stock reaction despite the second-quarter beat and guidance raise given a second half of the year outlook that he called "significantly below consensus" and "a reset on expectations." Nonetheless, Levy wonders if the second half of the year guidance is conservative. He believes commodity normalization was well anticipated, and while GM flagged a volume decline in the second half of the year, the commentary implies a worsening of the semi outlook, contrary to what he heard from GM in June. The analyst assumes some improvement is possible if the semi shortage eases somewhat. Levy has an Outperform rating and a price target of $77 on GM shares.

PRICE ACTION: In afternoon trading, shares of General Motors have dropped about 8.5% to $52.97.