Tesla’s Earnings Crushed Expectations, Setting More Records. The Stock Is Up.
first quarter numbers, disclosed Wednesday afternoon, look surprisingly great. The company, essentially, beat inflation by substituting materials and relentlessly focusing on manufacturing.
Shares are higher, recouping some losses seen earlier in the day.
The company (ticker: TSLA) earned a record $ 3.22 per share from $ 18.8 billion in total sales, its highest total ever. Wall Street was looking for EPS of about $ 2.20 to $ 2.30 a share from about $ 18 billion in sales, while in the fourth quarter of 2021, Tesla earned $ 2.54 a share on sales of $ 17.7 billion.
Operating profit came in at a record $ 3.6 billion, compared to expectations for about $ 2.6 billion.
Shares were up 4.2% in after-hours trading, at about $ 1,019 a share, shortly after the results were released. The stock fell about 5% in regular trading Wednesday, while the
lost about 1.2%. The
Sales of regulatory credits, which Tesla receives because it produces more than its fair share of low-emission vehicles, contributed to the surprise. Credit sales came in at $ 679 million in the first quarter, more than double expectations for about $ 312 million.
But even excluding credit sales, operating profit was a record and much better than Wall Street expected.
Analysts were projecting an earnings decline from the fourth into the first quarter because inflation was supposed to be a headwind for the company. The average price in the first quarter for a basket of metals that go into EV batteries was up more than 70% in the first quarter compared to the fourth.
Tesla management cited inflation pressures in the news release. But Tesla’s cost per car actually dropped compared to the fourth quarter.
That, along with most of the numbers reported, was a surprise. One potential, partial explanation is that Tesla buys are on long-term contracts. That can delay the impact when spot prices shoot higher.
Another reason costs fell was that about half the cars Tesla shipped in the first quarter included iron-phosphate, or LFP, batteries. Those are lithium-ion batteries without more expensive cobalt or nickel, metals that allow for better performance. LFP batteries do not pack as much power in the same cell, but a standard-range Model 3 with an LFP pack still gets 267 miles a charge, according to the company.
The stock should be up on Thursday.
The next point to watch is what emerges from the conference call to discuss the results, which begins at 5:30 pm Eastern time.Investors and analysts will be interested to hear about production at Tesla’s new plants in Austin, Texas and Berlin, Germany. They will also want to hear about the Covid-19 outbreak in China.
Tesla’s Shanghai facility shut down at the end of March due to local Covid restrictions. Limited production has reportedly begun again, but the situation is still fluid. Tesla, for instance, needs its Chinese supplier to keep running to ramp production back up.
Tesla did say in the news release that it expects to operate below capacity for the next few quarters because of Covid in China and supply-chain constraints. The company still expects to achieve an average annual growth rate of 50% in vehicle deliveries over “a multi-year horizon.”
Options markets implied a 5% move, up or down, following the earnings release. Shares have dropped three of the past four times Tesla has reported quarterly numbers. All four times, the company beat analysts’ projections.
This is breaking news. Check back soon for more detail and analysis.
Write to Al Root at email@example.com