Tesla Rounds Out 2018 With Mixed Q4 Earnings

Tesla Inc TSLA just couldn’t keep its momentum. After a profitable third-quarter, production strength in the second, and a bottom-line beat in the first, Tesla closed out 2018 with a sharp earnings miss.

Management reported quarterly earnings per share of $1.93 against estimates of $2.26. Revenue of $7.23 billion exceeded the Street’s $7.08 billion forecast.

Q4 Highlights

Tesla attributed a quarter-over-quarter decline in revenue to international market conditions and consumer demand.

“Operating income in Q4 remained stable at $414 million despite a sequential decline in revenue from the sale of regulatory credits, higher import duties on components from China, a price reduction for Model S and Model X in China, and the introduction of a lower-priced mid-range version of Model 3,” the statement read.

Tesla also recorded:

• End-of-quarter cash balance of $3.7 billion — up $718 million from the previous quarter;
• Sequential free-cash-flow growth to $910 million;
• Operating income of $414 million with a 5.7-percent operating margin;
• Deliveries of 63,359 Model 3s, as well as 27,607 Model Xs and Model Ss;
• A 1.5-percentage point decline in auto GAAP gross margins; and
• 7-percent quarter-over-quarter growth in energy storage revenue.

Additionally, Model 3 gross margins remained above 20 percent, and labor hours per vehicle fell 20 percent.

Q1 And 2018 Guidance

The firm targeted:

• First-quarter S and X deliveries slightly down year-over-year;
• Weekly Model 3 production rates of 7,000;
• Model 3 gross margins near 25 percent some time during 2019; and
• Delivery of 360,000 to 400,000 units throughout the year.

The year will marked by production expansion into the Shanghai Gigafactory, as well as deliveries expansion into Europe and China.

“We expect the capital spend per unit of capacity for this factory to be less than half of that of our Model 3 line in Fremont,” the statement read. “Additionally, this year we will start tooling for Model Y to achieve volume production by the end of 2020, most likely at Gigafactory 1. All of these activities are setting us up for very significant annual growth in 2019 and beyond.”

Management assured it has sufficient cash on hand to deal with its convertible bond maturing in March.

Tesla shares were down 2.3 percent at $301.50 in after-hours trading. The stock rose nearly 4 percent in the regular session.

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