Tesla Soars After Profit Tops Estimates on Record SalesMadeline O’Leary
Tesla Motors Inc. surged after the carmaker reported third-quarter results that beat analysts’ estimates and Chief Executive Officer Elon Musk predicted a 50 percent rise in orders and deliveries of the Model S next year.
Excluding some costs, earnings were 2 cents per share in the quarter, the Palo Alto, California-based company said today in a statement on its website. The average estimate compiled by Bloomberg was zero cents. Tesla advanced 7.1 percent to $247.34 at 5:50 p.m. New York time. The stock had gained 54 percent this year after slipping 3.3 percent in today’s regular trading.
“Despite losing almost a month of production due to factory retooling, we delivered the highest number of Model S vehicles ever, with several new records set in North America and worldwide,” Musk said in the letter posted to the company’s website.
The company has been constrained by an inability to make enough of its electric cars to meet demand. It retooled its assembly plant last quarter to increase output and has begun work on a massive battery factory to reduce costs and increase output. Tesla sees annual production rising more than 50 percent this year, again in 2015 “and probably for several years to follow,” Musk said in the letter to shareholders signed by him and Chief Financial Officer Deepak Ahuja.
Model S sales are forecast to reach 50,000 next year, Musk said on a conference call with analysts.
Tesla, which introduced an all-wheel drive Model S this quarter, said it plans to be able to build at an annualized pace of 100,000 vehicles by the end of next year. The company, which halted production at its Fremont, California, facility earlier in the quarter, had said it saw record sales in September.
“I’m not seeing anything too drastic in terms of growth dropping off,” said David Whiston, an equity analyst at Morningstar Inc. in Chicago. “The problem is that they’re not producing fast enough to meet demand, which is a good problem to have.”
The report wasn’t all good news for Tesla investors and customers waiting to receive their cars. The company said it plans to begin delivering its Model X sport-utility vehicle in the third quarter of 2015, “a few months later than previously expected,” and it trimmed its forecast for vehicle sales this year to 33,000 from 35,000.
Morgan Stanley said last month that the Model X may be delayed until the third quarter of next year, noting prototypes “have been difficult to spot.”
And this isn’t the first delay for the SUV model. In February, Tesla said prototype versions of the Model X would be on the road by the end of this year and mass deliveries would begin in early 2015. Musk had previously said initial deliveries would be by the end of 2014. Musk told Bloomberg Television that he was to blame for the delay.
“With respect to the X, I am somewhat of a perfectionist when it comes to product design,” he said. “It is hard to make an SUV that is beautiful and functional at the same time.”
Whiston said delays in the name of excellence are acceptable.
“I figured there would be bumps in terms of the Model X, and I agree with them that they must have the product right before it goes to market,” he said today in a telephone interview. “The production retooling didn’t go quite as quickly as they hoped, which will cause them to lose units in the fourth quarter, but that’s just quarterly noise. The company’s long-term thesis is intact.”
Quarterly unit sales for the youngest publicly held U.S. carmaker rose to a best-ever 7,785, short of the 7,892 that was the average of nine analysts’ estimates.
“The most important drivers of investor reaction are first and foremost the difference in deliveries, and second the outlook as it relates to production units per week,” James Albertine, an equity analyst at Stifel Nicolaus & Co., said in an interview ahead of the results. “That informs investors on the trajectory of growth. If those signs beat estimates, then the stock should perform well.”
Tesla said earlier today that the Model S received the maximum-possible five-star safety rating from the European New Car Assessment Program. It’s the only car this year to receive that designation as well as five stars in every subcategory of ratings from the U.S. National Highway Traffic Safety Administration, the company said.
Tesla, which doesn’t use model-year designations, said it improved its Model S in response to customer feedback, including more comfortable seats, larger sun visors, wider-opening rear doors and generally improved fit and finish.
Lane-departure warning and speed-limit alert are now standard features, the company said. Advanced cruise control, highway steering and emergency braking will be added via remote software updates in coming months, the letter to shareholders said.