GM beat on revenue, EPS and EBIT, but the narrowed guidance kept its midpoint, cutting upside as much as downside and driving a 5% drop. Still, the quarter was good overall and the narrower range adds clarity; GM bounced off long-term support near 76 and analyst disappointment often marks a contrarian entry.

Let's take a look at the one-day chart following General Motors' earnings report. We are now down 5.2 percent. It is one of the worst performing names in the broader index, as we mentioned earlier, which is due to the guidance cut.

It seems the market is not very happy with this.

Yes, as you pointed out, GM is the worst performer in the S&P 500 this morning, despite meeting earnings targets and a new buyback, but as you indicated, the real problem is with the guidance.

Their revenue this quarter was $50 billion. Which is about 3% more than a year ago. This was more than the consensus. EPS was also better than expected, coming in at $3.70. It was estimated to be around $3.57.

Adjusted EBIT was also better than expected, at $4.1 billion. This is more than the expected nearly $4 billion. This is an increase of about 22% year-on-year.

However, the big update and main problem is guidance. GM now expects adjusted EBIT of between $14.5 billion and $15.5 billion for the full year. The previous range was $14 to $16 billion and they are expecting EPS between $12.75 and $13.75.

The previous limit was $12 to $14. Adjusted automotive free cash flow between $11.5 and $12.5 billion. The previous limit was $9.5 to $11.5 billion.

Now the real problem is that the midpoint of these ranges has been kept the same, which means that as much as GM has reduced the downside, it has also reduced the upside by the same amount.

And it seems that selling pressure is building from here.

However, the board signed a multi-year authorization of $20 billion with no expiration date and declared a quarterly dividend of 18 cents per share. Regarding that buyback, Mary Barra says that they consider it a proven strategy.

The authorization of a new $20 billion multi-year share repurchase program announced today demonstrates our Board's commitment to creating greater value for shareholders.

He also said that they are working to maintain their momentum despite rising inflationary pressures. Their impact is certainly visible. They saw their international profits drop by 87%.

High commodity prices are pushing their prices higher, which is also dampening a strong quarterly result in North America.

They say they expect product inflation to be around $2 billion. The previous range was around $1.5 to $2 billion. So they are within that upper limit, including logistics and memory chip costs.

They have also reduced their expected regulatory benefits from $750 million to about $500 million. In contrast, total tariff costs are trending towards a lower range of $2.5 to $3.5 billion.

So there was a lot to choose from here, but everyone seemed to be stuck with that range of instructions. They are also dealing with the collapse of their EV sales and the shift away from their EV strategy.

Their EV sales are down about 62%, which is less than 4% of their total US volume. A year ago it was over 9%. If you exclude EVs, GM's sales were essentially flat. It was up about 0.3 percent.

So gas-powered trucks are helping to offset some of that loss, but they are still in the process of transitioning away from EVs, which is still a source of stress.

Sales of light-duty pickup trucks were a major driver. Sales increased 9.3% thanks to the Silverado. Sales of the GMC Sierra light-duty also increased. Sales of heavy-duty models or large pickup trucks were slightly lower.

The Silverado HD is actually down 10% and the Sierra HD is down about 7%, but it's still on track to lead the full-size pickup category for the seventh year in a row.

So while gas-powered trucks help offset that loss, the numbers overall are pretty good. The problem is the range of the guidance that everyone is worried about, because they narrowed the range but didn't change the midpoint, Sam.

Yes, as you said, but there is clearly still a lot of uncertainty about the outlook.

As you said, the stock price is down more than 5%, so let's discuss trading with options strategist Tim Bigham. How do you manage a trade on GM?

Yes, good morning Sam, I think the report was good overall. They've certainly done well in terms of revenue and the narrowing of the guidance range they've narrowed provides more clarity for the future to me.

I know the upper limit has decreased, but as Molly mentioned, the lower limit has increased, so I see the range narrowing a bit as a positive, because it can be easier to make decisions based on that.

The stock is also approaching that key support level of 76. In fact, it hit that level earlier today and bounced back quickly from there, so it looks like it's major long-term support.

The growth in guidance was not fully consistent with the growth in revenue and earnings. I think analysts may have been a little disappointed, but you know analysts are always upset in the short term.

This is usually a good time to take a position in the opposite direction.