Elon Musk has done it again, beating Wall Street expectations for TeslaOf
Good earnings for the fourth consecutive quarter.
The electric-vehicle manufacturer (ticker: TSLA) reported adjusted earnings per share of $ 2.18, and profit under generally accepted accounting principles or GAAP, 50 cents per share. Analysts were looking for results near the break-even line.
It is difficult to be more precise because earnings estimates on Tesla have been everywhere for the epidemic-hit second quarter. Estimates started the year at a profit of $ 1.90 per share, plunged by a loss of about $ 1.40, before recovering from a break-down on Wednesday that actually eased around.
Adjusted earnings are good for stockholders, but this is the GAAP profit most investors will focus on. With the second quarter in the books, Tesla has been rolling on a 12-month basis and profitable in the most recent quarter. Both are important criteria for inclusion in the S&P 500 index.
Shares trade up as much as 3.3%, just after the earnings tape hits. This is a relatively small step for Tesla.
What happens next is anybody’s guess. Tesla stock actually closed down 2.3% when the company reported strong first quarter results. Investors have high expectations from Tesla.
By generating solid profit margins in the automotive business, Tesla posted solid results. Automotive gross profit margin was about 25%, and Tesla earns it as a zero-emission automaker, excluding 17% credit.
Gross profit margin increased by about 6 percentage points year-over-year and flat compared to the first quarter of 2020. Bear investors may focus on how margins were boosted by regulatory credit, but the offsetting reflects the fact that Tesla has a factory in Fremont, California. As a result of the epidemic it was closed for part of the quarter.
Free cash flow generated in the second quarter was $ 418 million, much better than analysts had predicted.
Better than predicted is a common theme for Tesla these days. Street did not know what to expect for the second quarter numbers. Although the average between calls indicated that Tesla would break even more or less, the highest estimate was for a profit of $ 1.45 per share. The lowest estimate was a loss of $ 2.53 per share.
Wall Street rarely agrees on Tesla earnings or Tesla stock. Analysts’ price targets for the shares range from about $ 300 to $ 2,300. The $ 2,000 difference, or bull-bear spread, is more than 100% of the stock’s current price and nearly three times the average spread for the stock in the Dow Jones Industrial Average.
The second quarter results are more fodder for investors with the assurance that electric cars are the future and Tesla will maintain its competitive edge in the category.
Tesla shares traded up about 6% week to end Wednesday trading. Year-on-year, the stock was up nearly 280%, with comparable returns from the Dow and S&P crushing Tesla’s automotive peers.
The company calls a conference at 5:30 pm Eastern Time to discuss the results.
Write Al Root at [email protected]