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Company earningsNews

Catching Wall Street off guard, Tesla turns a profit, beats Q3 estimates

Stock soars after the electric vehicle maker posts better than expected Q3 results.

Can Tesla (NASDAQ: TSLA) turn a profit? That was the burning question seared into the brains of investors awaiting the electric car (and truck, lest we forget) maker’s Q3 earnings report. 

The answer, apparently, is yes it can. Tesla posted $1.91 adjusted profit per share on Wednesday, beating Wall Street estimates of $-0.24 per share.

Its gross margin clocked in at 18.9%, versus estimates of 17.7% .

In its shareholder letter, the company said it expects “positive quarterly free cash flow going forward, with possible temporary exceptions.”

On a slightly bleaker note, third quarter revenue declined, registering $6.30 billion, down from estimates of $6.42 billion and $6.35 billion in the second quarter of 2019.

In the letter, Tesla explained the losses: “Compared to the third quarter of 2018, the percentage of leased vehicles has tripled and alone has impacted revenue by the majority of the year-over-year decrease.”

Revenues for the third quarter of 2018 were $6.824 billion.

The results were a vindication for Musk, who has been much derided for not delivering on his financial promises – or vehicles.

Analysts’ naysayer estimates were based on a vehicle and production and delivery update earlier this month that missed Musk’s internal goals. 

Tesla delivered 79,600 Model 3 cars, and 17,400 of its higher-priced Model S and X vehicles during the third quarter. Musk had set a goal of 100,000 plus deliveries for the quarter.

In the letter, Tesla credited the rosier financial outlook to improved operating expenses, now at the lowest level since production of the Model 3 started. Efficiencies included reductions in manufacturing and material costs and continued improvements in vehicle quality. 

Tesla also told shareholders its new Model 3 factory in Shanghai is ahead of schedule, and that the company is already producing vehicles there on a trial basis. It is also ahead on start-of-production for its Model Y crossover SUV at the company’s main plant in Fremont, California. 

As for the long-awaited commercial truck offering — after missing several delivery targets, Tesla now says it expects to bring the Tesla Semi electric truck to production at the end of 2020.  

Earnings call: Tesla Energy and Full Self Drive

During an earnings call with investors, Musk appeared to be in the driver’s seat, celebrating the company’s profitability and new factories and offering intriguing insights on its formerly under-the-radar energy business, which sells solar panels and battery packs.

Tesla solar panel installs increased 48% over Q2, and in the long term, Musk expects that division to reach parity with automotive sales. 

“That’s going to be really crazy growth” he said.

On a more controversial topic, Tesla’s Full Self Drive feature, he was less surefooted. Early in the call Musk said the autonomous platform would be ready at the end of this year in a so-called “feature-complete release.” Tesla would make that release available, he said, in an “early access” mode.

Later, responding to an investor question, Musk dialed back that statement, saying he thinks “early access” availability could come at the end of 2019, but that full self-driving “reliable enough that you do not need to pay attention, in our opinion” won’t be available until “the end of next year.”

Muddying the waters further, Musk said “feature-complete” refers to a level of autonomy where “the car is able to be autonomous but requires intervention and supervision at times.” 

Shares of Tesla rose as much as 12% in after-hours trading following the release.  

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Linda Baker, Staff Writer

Linda Baker is a FreightWaves staff reporter based in Portland, Oregon. Her beat includes early-stage VC, freight-tech, mobility and West Coast emissions regulations.

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