Tesla’s Earnings Day Is Here. This Is the Real Number to Watch.

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investors expect

Tesla

to earn more than expected when it reports its fourth-quarter results after the close of trading Wednesday because that is what typically happens. Predicting what will happen to the stock afterward is much more difficult.

Wall Street projects Tesla (ticker: TSLA) will earn about $2.36 a share for the fourth quarter of 2021. Estimates have 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 per-share earnings for the fourth quarter. Tesla earned $1.86 a share in the third quarter of 2021.

It will take an earnings “beat” to get Tesla shares moving higher because most investors—not just people holdingTesla stock—expect better-than-projected earnings. Companies beat profit forecasts 60% to 70% of the time. Tesla has beaten Wall Street estimates seven out of the past eight quarters it reported.

That outperformance doesn’t always mean a rising Tesla stock. Tesla 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 25% number can still be useful, though. For earnings to come in 25% better than analysts expect, Tesla would need a fourth-quarter profit of about $2.95 a share. That would be a strong enough number to see the stock rise, unless commentary from management or some other factor raises concerns. Options markets imply that Tesla stock will move about 10%, up or down, following earnings.

After the earnings are released, the company will host a conference call at 5:30 p.m. Eastern time to discuss the results. Investors will want to hear what CEO Elon Musk has to say. He doesn’t take part in every quarterly conference call any longer, but he is speaking Wednesday to give investors a product update. What Musk says might move the stock as much as, or more than, the fourth-quarter results.

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
have fallen about 9% and 6% so far in 2022, respectively.

Tesla stock is up 3% in early Wednesday trading, ahead of results. The S&P and Dow have added 1.1% and 0.6%, respectively.

Write to Al Root at [email protected]