Tesla has posted solid fourth quarter numbers, but investors will want to hear more about demand and profit margins later tonight.
(ticker: TSLA) reported fourth-quarter earnings per share of $1.19 on revenue of $24.3 billion Wednesday night. Operating profit was a record $3.9 billion, up from the previous record of $3.7 billion reported in the third quarter.
Wall Street was looking for earnings per share of about $1.13 and an operating profit of $4.2 billion from $24.7 billion in sales.
Free cash flow for the quarter was $1.4 billion. Analysts had expected $2.7 billion.
Looking ahead, Tesla said it plans to produce 1.8 million units by 2023. The Street is looking for about 1.9 million units.
It’s an OK report. Shares are up 3.8% in after-hours trading shortly after the results were announced. Shares of Tesla closed 0.4% higher in trading on Wednesday at $144.43. The S&P 500 and Dow Jones Industrial Average were both flat on the day.
Investors can expect shares to move following the company’s earnings conference call, which begins at 5:30 p.m. Eastern time. Investors will be looking for comments on production, profit margins, EV competition and new products. They want an update on everything.
This is the latest news. Read a preview of the earnings report below.
Tesla earnings reports are always must-watch events for investors, and the EV pioneer’s forthcoming fourth quarter report due Wednesday afternoon is no exception. It could even be the most important earnings report in the company’s history.
There have been other “most” significant quarters in the company’s past. In 2010, Tesla (ticker: TSLA) reported its first full quarter as a public company, generating approximately $31 million in sales from the original Roadster. There were the quarters when the EV pioneer started shipping the Model S – its first mass-produced car – in 2012 and the lower-priced Model 3 in 2017.
There was also the third quarter of 2019, when Tesla posted a surprise profit. In the more than three years prior to that period, Tesla had lost about $2.5 billion in operating profit and used more than $5 billion in cash overall. Since then, Tesla has cumulatively generated nearly $19 billion in operating profit and $15 billion in free cash flow.
It is arguable that the forthcoming fourth-quarter report surpasses all of these.
is now the most actively traded stock in the US market, but is facing a more difficult economic environment, with rising interest rates, high inflation and recession fears. In addition, EV competition continues to grow and investors are also wary of CEO Elon Musk’s new role as owner of the social media platform Twitter.
“After experiencing unprecedented hypergrowth in the EV market in recent years, which was essentially created by Musk, Tesla faces a dark macro in 2023,” Wedbush analyst Dan Ives wrote in a report Tuesday.
Ives is a Tesla bull, buy rating shares. His price target is $175 per share.
Tesla slashed the prices of its EVs around the world in early 2023 in a bleak macroeconomic context, which has created fear and uncertainty around EV demand and Tesla’s profit margins.
For 2022, Tesla will generate gross profit margins of approximately 26% from its automotive business, based on the first three quarters of the year and Wall Street’s consensus estimates. For the full year 2023, after the price cuts, forecasts of gross profit margins in the automotive industry are down 17% to 22%. Operating profit estimates for 2023 now range from about $9 billion to $30 billion, according to FactSet.
That’s a wide range, even for Tesla, and means the stock should see a lot of volatility in 2023. The $21 billion range for operating profit projections is about 140% of the $15 billion median estimate. In early 2022, the estimated reach was about $13 billion, or about 100% of the median estimate.
When Tesla reports Wednesday after market close, investors will want an update on profit margins, production and sales. They will also want to see how the year ended.
Wall Street expects earnings per share of about $1.13 versus revenue of $24.7 billion for the fourth quarter. Operating income and free cash flow are expected to be $4.2 billion and $2.7 billion, respectively.
Tesla earned $1.05 per share from $21.5 billion in sales in the third quarter of 2022. Operating profit and free cash flow were approximately $3.7 billion and $3.3 billion, respectively.
Whatever Tesla reports, investors should be ready for trading volatility. Options markets imply that the stock will move up or down about 10% after the earnings report. Stocks are up or down an average of about 8% after the past four quarterly reports. Stocks have risen twice and fallen twice in that period.
Tesla stock has started the year strong, up about 13% year to date. The S&P 500 and the Dow Jones Industrial Average are up about 3% and 6% respectively.
Shares of Tesla fell 3.4% in early trading on Wednesday. The
is 2.2% lower.
Write to Al Root at email@example.com