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Tesla (TSLA) Q2 Earnings Beat but Shrinking Margins Disappoint
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Tesla (TSLA - Free Report) reported second-quarter 2023 earnings of 91 cents per share, which rose from the year-ago figure of 76 cents and outpaced the Zacks Consensus Estimate of 83 cents. This marked the 10th consecutive earnings beat for this electric vehicle (EV) behemoth. Record deliveries and revenues, which topped expectations, resulted in this outperformance. Total revenues came in at $24,927 million, witnessing year-over-year growth of 47%. The top line exceeded the consensus mark of $24,884 million.
However, shares dropped more than 4% in after-hours trading amid shrinking gross and operating margins. Tesla’s operating margins dipped to single digits in the quarter under discussion. The metric came in at 9.6% (the lowest level in the past five quarters), also lagging our estimate of 10.2%. The underperformance can be attributed to unexpectedly higher costs involved in scaling up the production of new battery cells, the Cybertruck, and other large projects.
Management stuck to its target of around 50% growth in deliveries in the foreseeable future. For 2023, it expects deliveries to reach 1.8 million units. Nonetheless, the company anticipates third-quarter 2023 production volumes to slow down amid factory shutdowns for improvements.
Tesla’s second-quarter production totaled 479,700 units (460,211 Model 3/Y, and 19,489 Model S/X), up 86% year over year and surpassing our estimate of 452,602 units. Deliveries also exceeded our forecast on stronger-than-expected demand despite high interest rates. Tesla offered discounts and other incentives in the United States to increase affordability, which translated to robust deliveries. Additionally, all trims of the Model 3/Y vehicles qualified for the full $7,500 federal tax credit under the Inflation Reduction Act in the United States during the second quarter, which bolstered sales. The company delivered 466,140 vehicles, reflecting a year-over-year jump of 83% and topping our estimate of 434,736 units.
The Model 3/Y registered deliveries of 446,915 vehicles, marking year-over-year growth of 87% and outpacing our projection by 26,759 units. Deliveries of the Model S/X totaled 19,225 units, up 19% from the year-ago levels and ahead of our estimate of 14,579 units.
Total automotive revenues of $21,268 million jumped 46% year over year and beat our estimate of $20,276 million. The reported figure also included $282 million from the sale of regulatory credits for electric vehicles, which declined 18% year over year. Automotive sales, excluding revenues from leasing and regulatory credits, totaled $20,419 million, surpassing our projection of $19,169 million on stronger-than-expected deliveries.
Automotive gross profit came in at $4,089 million, missing our estimate of $4,197 million. Automotive gross margin came in at 19.2%, down from 27.9% reported in second-quarter 2022 as well as lagging our forecast of 20.7%. This can be attributed to price cuts on models as well higher-than-expected cost of automotive sales. The metric came in at 16,841 million, exceeding our projection of 15,676 million.
Energy Generation and Storage revenues came in at $1,509 million in second-quarter 2023, significantly higher than the year-ago quarter’s figure of $866 million but missing our estimate of $1,573 million. Notably, energy storage deployments rocketed by 222% year over year to 3.65 GWh, thanks to the ramp up of the Megapack factory in California but missed our projection of 3.9 GWh. Additionally, solar deployments also came below our expectations. The metric came in at 66 MW, lower than our forecast of 108.7 MW amid high interest rates, which led to the postponement of solar purchasing.
Services and Other revenues were $2,150 million, up 47% year over year and topping our estimate of $1,760 million. During the second quarter of 2023, Supercharging dominated the scene as numerous companies, such as Ford, General Motors, Mercedes, Nissan, Polestar, Rivian, Volvo and Electrify America, revealed their plans to adopt Tesla’s North American Charging Standard.
Financials
Tesla had cash and cash equivalents of $23,075 million as of Jun 30, 2023 compared with $22,402 million on Mar 31, 2023. Net cash provided by operating activities amounted to $3,065 million in second-quarter 2023. Capital expenditure totaled $2,060 million in the quarter under review.
Tesla generated a free cash flow of $1,005 million during the reported quarter, which surged 62% year over year. Long-term debt and finance leases, net of the current portion, totaled $872 million, down from $1,272 million on Mar 31, 2023.
The Zacks Consensus Estimate for F’s 2023 sales implies year-over-year growth of 6.6%. The 2023 EPS estimate has been revised upward by 4 cents in the past 30 days. The EPS estimate for 2024 has moved north by 3 cents in the past 30 days.
The Zacks Consensus Estimate for PCAR’s 2023 sales and earnings implies year-over-year growth of 15.6% and 36.35%, respectively. The 2023 EPS estimate has been revised upward by 1 cent in the past 30 days.
The Zacks Consensus Estimate for CMI’s 2023 sales and earnings implies year-over-year growth of 17% and 31%, respectively. The EPS estimate for 2023 has moved north by 2 cents in the past seven days.
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Tesla (TSLA) Q2 Earnings Beat but Shrinking Margins Disappoint
Tesla (TSLA - Free Report) reported second-quarter 2023 earnings of 91 cents per share, which rose from the year-ago figure of 76 cents and outpaced the Zacks Consensus Estimate of 83 cents. This marked the 10th consecutive earnings beat for this electric vehicle (EV) behemoth. Record deliveries and revenues, which topped expectations, resulted in this outperformance. Total revenues came in at $24,927 million, witnessing year-over-year growth of 47%. The top line exceeded the consensus mark of $24,884 million.
However, shares dropped more than 4% in after-hours trading amid shrinking gross and operating margins. Tesla’s operating margins dipped to single digits in the quarter under discussion. The metric came in at 9.6% (the lowest level in the past five quarters), also lagging our estimate of 10.2%. The underperformance can be attributed to unexpectedly higher costs involved in scaling up the production of new battery cells, the Cybertruck, and other large projects.
Management stuck to its target of around 50% growth in deliveries in the foreseeable future. For 2023, it expects deliveries to reach 1.8 million units. Nonetheless, the company anticipates third-quarter 2023 production volumes to slow down amid factory shutdowns for improvements.
Tesla, Inc. Price, Consensus and EPS Surprise
Tesla, Inc. price-consensus-eps-surprise-chart | Tesla, Inc. Quote
Key Takeaways
Tesla’s second-quarter production totaled 479,700 units (460,211 Model 3/Y, and 19,489 Model S/X), up 86% year over year and surpassing our estimate of 452,602 units. Deliveries also exceeded our forecast on stronger-than-expected demand despite high interest rates. Tesla offered discounts and other incentives in the United States to increase affordability, which translated to robust deliveries. Additionally, all trims of the Model 3/Y vehicles qualified for the full $7,500 federal tax credit under the Inflation Reduction Act in the United States during the second quarter, which bolstered sales. The company delivered 466,140 vehicles, reflecting a year-over-year jump of 83% and topping our estimate of 434,736 units.
The Model 3/Y registered deliveries of 446,915 vehicles, marking year-over-year growth of 87% and outpacing our projection by 26,759 units. Deliveries of the Model S/X totaled 19,225 units, up 19% from the year-ago levels and ahead of our estimate of 14,579 units.
Total automotive revenues of $21,268 million jumped 46% year over year and beat our estimate of $20,276 million. The reported figure also included $282 million from the sale of regulatory credits for electric vehicles, which declined 18% year over year. Automotive sales, excluding revenues from leasing and regulatory credits, totaled $20,419 million, surpassing our projection of $19,169 million on stronger-than-expected deliveries.
Automotive gross profit came in at $4,089 million, missing our estimate of $4,197 million. Automotive gross margin came in at 19.2%, down from 27.9% reported in second-quarter 2022 as well as lagging our forecast of 20.7%. This can be attributed to price cuts on models as well higher-than-expected cost of automotive sales. The metric came in at 16,841 million, exceeding our projection of 15,676 million.
Energy Generation and Storage revenues came in at $1,509 million in second-quarter 2023, significantly higher than the year-ago quarter’s figure of $866 million but missing our estimate of $1,573 million. Notably, energy storage deployments rocketed by 222% year over year to 3.65 GWh, thanks to the ramp up of the Megapack factory in California but missed our projection of 3.9 GWh. Additionally, solar deployments also came below our expectations. The metric came in at 66 MW, lower than our forecast of 108.7 MW amid high interest rates, which led to the postponement of solar purchasing.
Services and Other revenues were $2,150 million, up 47% year over year and topping our estimate of $1,760 million. During the second quarter of 2023, Supercharging dominated the scene as numerous companies, such as Ford, General Motors, Mercedes, Nissan, Polestar, Rivian, Volvo and Electrify America, revealed their plans to adopt Tesla’s North American Charging Standard.
Financials
Tesla had cash and cash equivalents of $23,075 million as of Jun 30, 2023 compared with $22,402 million on Mar 31, 2023. Net cash provided by operating activities amounted to $3,065 million in second-quarter 2023. Capital expenditure totaled $2,060 million in the quarter under review.
Tesla generated a free cash flow of $1,005 million during the reported quarter, which surged 62% year over year. Long-term debt and finance leases, net of the current portion, totaled $872 million, down from $1,272 million on Mar 31, 2023.
Zacks Rank & Key Picks
Tesla currently carries a Zacks Rank #3 (Hold).
A few better-ranked players in the auto space include Ford (F - Free Report) , PACCAR (PCAR - Free Report) and Cummins (CMI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for F’s 2023 sales implies year-over-year growth of 6.6%. The 2023 EPS estimate has been revised upward by 4 cents in the past 30 days. The EPS estimate for 2024 has moved north by 3 cents in the past 30 days.
The Zacks Consensus Estimate for PCAR’s 2023 sales and earnings implies year-over-year growth of 15.6% and 36.35%, respectively. The 2023 EPS estimate has been revised upward by 1 cent in the past 30 days.
The Zacks Consensus Estimate for CMI’s 2023 sales and earnings implies year-over-year growth of 17% and 31%, respectively. The EPS estimate for 2023 has moved north by 2 cents in the past seven days.