Tesla Reports a Record Profit. Its Outperformance Was Below Average.

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Tesla

stock was bobbing around the break even line after the company reported better-than-expected earnings figures, an initial reaction that shows record results might not be good enough for investors.

Shares of Tesla (ticker: TSLA ) were at about $934 at 6 p.m. eastern time.

The company reported adjusted earnings of $2.54 a share in the fourth quarter on $17.7 billion in sales. Operating profit came in at $2.6 billion, and free cash flow at $2.8 billion. Each of those figures represents quarterly records for the company.

Automotive gross profit margins—excluding any benefits from regulatory credits—increased to 29.2% in the fourth quarter from 28.8% reported in the third quarter. Margins improved even as Tesla said supply-chain headwinds prevented the company from operating its plants at full capacity. (The company still produced a record 305,840 vehicles in the fourth quarter.)

Wall Street was looking for Tesla to report earnings per share of $2.36 on $17.1 billion in sales. Estimates for operating profit and free cash flow were $2.7 billion and $1.2 billion, respectively.

The operating profit figure reported was a little light, but that figure includes $245 million related to performance stock awards. That expense fluctuates from quarter to quarter and is difficult to project. Tesla also called out $340 million in payroll taxes due because Elon Musk exercised expiring stock options.

It isn’t easy to back out all of the one time or unusual expenses—such as the payroll-tax figure which was created by a 2012 stock option award to Musk—to arrive at a different adjusted-earnings number. (It also isn’t a good idea to recast numbers over and over again to arrive at potentially more positive or more negative numbers.) On the whole, it was another solid earnings report for the electric-vehicle maker.

Wall Street estimates had been creeping up since the company reported better-than-expected fourth-quarter delivery numbers on Jan. 3. In late December, analysts were projecting less than $2 in EPS for the fourth quarter. Tesla’s third-quarter EPS was $1.86.

The rise in forecasts is one reason investors expected Tesla to earn more than analysts projected, but an earnings beat is also what history tells one to expect. Tesla has earned more than Wall Street estimated seven out of the past eight quarters it reported.

That outperformance doesn’t always mean a rising Tesla stock. The shares have only gained three times the day following the past eight earnings reports. The average move, up or down, over those quarters has been about 4%.

The average magnitude of Tesla’s earnings “beats” in recent quarters is about 25%. Calculating an average outperformance over longer periods gets tricky because sometimes analysts projected a loss and Tesla reported positive earnings. (There is no percentage outperformance when companies report an unexpected profit.)

The earnings beat for the fourth quarter is about 8%. That is solid, but below the average of 25%. It might not be enough given the recent market turmoil.

Tech stocks have struggled amid fears of higher inflation and rising rates. Coming into Wednesday trading, Tesla stock was down about 13% year to date, similar to the decline in the

Nasdaq Composite.
The

S&P 500
and

Dow Jones Industrial Average
had respectively fallen about 9% and 6% over the same span.

The company hosted a conference call at 5:30 p.m. Eastern time to discuss the results. Musk shared some tidbits for investors. Cybertruck likely won’t ship until 2023. Instead of new models, Tesla is focused on producing more of the existing models in 2022. That timing might be a mild disappointment for investors, but it isn’t a big surprise.

Musk also said that production had started at Tesla’s new Austin, Texas, facility and that customer deliveries would be begin shortly. He also mentioned that the location of another Tesla plant might be announced by the end of 2022.

In the more exciting category of comments, Musk remains confident that Tesla will have achieve truly self driving technology by the end of 2023. And he believes Tesla’s robot, called Optimus, could turn into a bigger business than Tesla’s car business over time.

Tesla stock rose 2.1% in regular trading Wednesday. The S&P 500 closed down about 0.2%.

Write to Al Root at [email protected]