Tesla reports back-to-back profitable quarters

Tesla reported Wednesday a profit of $139 million, or $0.78 per share, along with better-than-expected earnings, nevertheless failed to meet analysts’ expectations for earnings in the fourth quarter. Shares dropped after the markets closed and are down 1.7 percent as of 2:30 pm PT.

Tesla has been able to string together two lucrative intervals in a row thanks to the earnings of the Model 3 and despite several headwinds in the fourth quarter, including a non-cash charge of $54 million attributable to non-controlling interests, higher import duties on components in China, a price discount for Model S and Model X in China and also the introduction of a lower-priced mid size version of Model 3.

In October, Tesla reported its first profit after seven successive quarters of losses. It was just the third time in its history it had attained this milestone.

Tesla’s lucrative fourth quarter lies in stark contrast to its financial standing in exactly the identical period last year when it reported a reduction of $675 million, or $1.75 per share.

Maybe as critical as the automaker’s income is its cash position. Tesla noted that its cash position rose by $1.45 billion regardless of the scheduled repayment of a $230 million convertible bond in the fourth quarter.

“We now have cash to settle in cash our bond which will mature in March 2019,” the Bank letter to investors said.

Here are a Couple of of the highlights:

Tesla’s Q4 revenues were $7.2 billion, up from $6.8 billion in the third quarter
Tesla’s Q4 operating cash flow less capital expenditures rose to $910 million
Cash and cash equivalents rose by $ $718 million to hit $3.7 billion at the end of this fourth quarter
Model 3 production volumes in Fremont must achieve a sustained rate of 7,000 units per week by end of 2019

Participants shot a tone in reaction to Tesla’so called fourth-quarter earnings report, noting the challenges which lie ahead as well as the firm ’ s achievements.

“Things really aren’t likely to get any better for Tesla in the U.S. than they ever did at the end of 2018,” Jessica Caldwell, executive director of industry analysis at Edmunds, said in an emailed statement. “Turning a profit fixing production challenges and getting the Model 3 were milestones, but keeping this up momentum is going to be impossible. Tesla’s product lineup and thanks to the elimination of the tax free, purchasing one has never been more costly. While there s a cool factor to owning a Tesla, it may be inadequate to convince buyers to select one over brand-new models from Audi, Porsche and Jaguar. Tesla’s between being a mainstream automaker and also a startup in an awkward purgatory, where the business goes from here, and also the largest open question heading to 2019 is. Tesla is used to owning the spotlight, but for your second year we may observe a lower-key Tesla as the business takes baby steps to help keep things moving along while it aims for your future. ”

The challenges would be for Tesla to increase, or maintain, margins even as the tax credit continues to end up.

Looking forward

Tesla is predicting this Model 3 volumes will grow due to a full year of production rates that are substantially ” in 2019 in its facility in Fremont, California.

Tesla said it plans to start producing Model 3 vehicles at its “gigafactory” in Shanghai at the end of the year. The automaker says they mean to slash the cost of producing Model 3s at the factory in China, a prediction that if successful will help improve margins.

“We expect the capital spend per unit of power for this factory to be less than half of that of our Model 3 line in Fremont,” the firm said.

Tesla can be targeting price reductions in the U.S and anticipates operating expenses will expand by less than 10 percent in 2019. The automaker says that restructuring actions taken from the first quarter — that includes layoffs that occurred this month — can decrease costs by roughly $400 million.

Tesla’s financials will reveal a restructuring price, the company forecasted.

Consequently, Tesla states it s remaining optimistic it will post a little profit in the first quarter if it can keep costs down and manage logistics and delivery challenges in Europe and China.

Tesla reported January 2 it delivered 90,700 automobiles during the fourth quarter, just shy of what analysts expected. The company said at the time it delivered 13,500 Model S sedans, 14,050 Model X SUVs and 63,150 Model 3s.