Tesla Inc. TSLA delivered a “clean beat” in its third-quarter earnings, according to The Future Fund LLC Managing Partner Gary Black, who highlighted the company’s significant outperformance across key metrics, driving shares up 12.10% in after-hours trading.
What Happened: Black, analyzing the results on X (formerly Twitter), noted that Tesla reported adjusted earnings per share of $0.72, significantly exceeding both Wall Street estimates of $0.58 and his own projection of $0.56.
The fund manager identified several key drivers behind the earnings beat:
- Automotive gross margins excluding regulatory credits reached 17.1%, surpassing Wall Street estimates of 14.9%
- Energy division profits increased 90%, with margins improving to 30.5% from 24.4% year-over-year
- Service segment profits grew 91%, with margins rising to 8.8% from 6.0% year-over-year
- Automotive cost of goods sold per unit fell to a record low of $35,100, down 6.4% year-over-year
- Regulatory credits totaled $739 million, exceeding estimates of $536 million
- Adjusted EBITDA hit $4.7 billion versus $3.8 billion estimated
- Free cash flow reached $2.7 billion, surpassing estimates of $1.6 billion
Black acknowledged that his team’s estimates had been “too conservative,” particularly regarding Tesla’s auto loan subsidies. He emphasized the significance of CEO Elon Musk‘s fiscal year 2025 delivery growth guidance of 20-30% year-over-year, which substantially exceeds Wall Street’s current projection of 14% growth.
“The last time Tesla had a quarter like this was in April 2024,” Black noted, comparing it to when the stock rose 12% following first-quarter earnings. He emphasized that the current quarter’s positive surprise, driving an 11% after-hours gain, “was all fundamentals,” pointing to the automotive gross margin’s role in delivering the 20% adjusted earnings beat.
Based on these results, Black expects analysts to revise their fiscal year 2024 adjusted earnings per share estimates from $2.26 to at least $2.40.
Why It Matters: Despite the third quarter earnings exceeding expectations, Musk has shut down the idea of developing a conventional $25,000 car, marking a strategic pivot towards an all-autonomous future for the EV maker.
Following the earnings report, Tesla’s stock surged over 12% in after-hours trading, with Wall Street analyst Dan Ives suggesting that the worst may be behind the company due to the significant turnaround in gross margins.
Price Action: Tesla Inc.'s stock closed at $213.65 on Wednesday, down 1.98% for the day. In after-hours trading, the stock surged by 12.10%. Year to date, Tesla's stock has declined by 14.00%, according to data from Benzinga Pro.
Read Next:
Image via Pixabay
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
