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Héctor Retamal / AFP via Getty Images
Elon Musk has done it again, exceeding Wall Street expectations for Tesla‘s
earnings significantly for the fourth consecutive quarter.
The electric vehicle manufacturing company (ticker: TSLA) reported adjusted earnings per share of $ 2.18, and a profit under generally accepted accounting principles, or GAAP, of 50 cents a share. Analysts were looking for results near the equilibrium line.
It’s hard to be more precise because the Tesla earnings estimates have been everywhere for the pandemic-hit second quarter. The estimates started the year with a profit of $ 1.90 per share, it came down to a loss of about $ 1.40, before recovering to break even when earnings actually arrived on Wednesday.
Adjusted earnings are good for shareholders, but most investors will focus on GAAP earnings. With the second quarter on the books, Tesla has been profitable continuously for 12 months and profitable in the most recent quarter. Both are key criteria for inclusion in the S&P 500 index.
Shares rose 3.3% in after-hours trading, just after earnings hit the ribbon. It is a relatively small move for Tesla.
What happens next is unknown. Tesla shares actually closed 2.3% lower after the company reported solid first quarter results. Investors expect a lot from Tesla.
Tesla posted solid results, in part, by generating solid profit margins in the automotive business. Automotive gross profit margins were approximately 25%, and 17% excluding credits Tesla obtains as a producer of zero-emission vehicles.
Gross profit margins increased approximately 6 percentage points year-over-year and held steady compared to the first quarter of 2020. Bearish investors may focus on how margins increased regulatory credits, but offsetting that is the fact that the factory of Tesla in Fremont, California, was closed for part of the quarter as a result of the pandemic.
Free cash flow generated in the second quarter was $ 418 million, much better than analysts predicted.
Better than expected is a common theme for Tesla these days. The street did not know what to expect for the second quarter numbers. Although the average between calls indicated that Tesla would reach an equilibrium point 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 accepts Tesla’s earnings or Tesla’s shares. Analyst price targets for stocks range from about $ 300 to $ 2,300. The $ 2,000 gap, or bullish bear differential, is more than 100% of the current stock price and is approximately three times greater than the average share margin on the Dow Jones Industrial Average.
The second quarter results are more fodder for investors convinced that electric cars are the future and that Tesla will maintain its competitive leadership in the category.
Tesla shares are up approximately 6% to date until the close of trading on Wednesday’s close. To date, the stock has risen approximately 280%, crushing the comparable returns of Dow and S&P, as well as Tesla’s automotive peers.
The company organizes a conference call at 5:30 pm EST to discuss the results.
Write to Al Root at [email protected]
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