Tesla 3Q earnings top estimates after deliveries set record high

Tesla (TSLA) posted third-quarter profits that topped expectations, with record deliveries helping fuel the electric-vehicle maker's results even as supply chain challenges weighed broadly on the auto industry. However, quarterly revenue came in short of consensus expectations, and shares fell slightly in after-hours trading.

Here were the main metrics from Tesla's report, compared to consensus estimates compiled by Bloomberg:

  • Revenue: $13.76 billion vs. $13.91 billion expected, $8.77 billion Y/Y

  • Adjusted earnings per share: $1.86 vs. $1.67 expected, 76 cents Y/Y

Earlier this month, Tesla announced it handed over 241,300 of its electric vehicles globally in the three months ending in September, representing a new all-time high for quarterly deliveries. This brought year-to-date deliveries to about 627,500 — already well above the nearly 500,000 deliveries Tesla posted in all of 2020. Deliveries serve as one of the most closely watched metrics at Tesla as a signal of electric-vehicle demand. On Wednesday, Tesla also reiterated its previous guidance to achieve 50% average annual growth in vehicle deliveries over a multi-year horizon.

Third-quarter deliveries were driven again by the more affordable Model 3 and Model Y vehicles, which are combined under Tesla's reporting structure. Together, these models comprised over 232,000 of the overall quarterly deliveries. Tesla said Wednesday its average selling price (ASP) of vehicles decreased by 6% over last year "due to continued mix shift towards lower-priced vehicles."

Still, Tesla widened its operating margin to 14.6% in the third quarter, versus 11.0% in the second quarter and 9.2% in the same period last year.

"Our operating margin reached an all-time high as we continue to reduce cost at a higher rate than declines in ASP," Tesla said in its shareholder letter.

Automotive gross margins, derived from Tesla's core business of selling electric vehicles, also expanded to reach 28.8% in the third quarter from 25.8% in the second. This metric strips out positive impacts from sales of regulatory credits by the electric vehicle-maker to other automakers. These high-margin regulatory credit sales accounted for $279 million in the third quarter, down from $397 million in the same period last year.

Meanwhile, Tesla also booked a bitcoin-related impairment of $51 million in the third quarter from its balance-sheet holdings of the cryptocurrency, which served as a negative impact to profits. This marked a second straight quarterly bitcoin-related impairment charge for Tesla. In the first quarter of 2021, Tesla's bitcoin holdings had generated a $101 million positive impact, net of impairments.

Tesla's third-quarter deliveries, which topped Wall Street's quarterly estimates and grew more than 70% over last year, stood in stark contrast to the disappointing sales results from a number of legacy automakers. General Motors (GM) said it delivered 446,997 vehicles in the third quarter, representing a plunge of 32.8% over last year as chip shortages resulted in weeks-long production disruptions. And American Honda sales tumbled 10.9% over last year, coming in worse than the 6.7% drop Wall Street analysts were expecting, based on Bloomberg data.

Tesla, however, has also contended with supply chain disruptions due to global semiconductor shortages, and vehicle deliveries during the third-quarter outpaced production.

"A variety of challenges, including semiconductor shortages, congestion at ports and rolling blackouts, have been impacting our ability to keep factories running at full speed," Tesla said in its shareholder letter on Wednesday. "We believe our supply chain, engineering and production teams have been dealing with these global challenges with ingenuity, agility and flexibility that is unparalleled in the automotive industry."

And during the company's annual meeting earlier this month, Tesla CEO Elon Musk also highlighted that supply-side challenges were coming from multiple fronts.

"This year has been just a constant struggle with parts supply ... We're just basically limited by multiple supply chain shortages, like so many supply chains of so many types, not just chips," Musk said. "We should be through our severe supply chain shortages in '23. I'm optimistic that that will be the case."

The logo of car manufacturer Tesla is seen at a dealership in London, Britain, May 14, 2021. REUTERS/Matthew Childs
The logo of car manufacturer Tesla is seen at a dealership in London, Britain, May 14, 2021. REUTERS/Matthew Childs

Musk also added at the time that he expected Tesla's new Cybertruck would start production by the end of next year before reaching volume production in 2023, and that he was "hopeful" the Semi and Roadster would start production that year as well.

In Tesla's shareholder letter Wednesday, the company added it is "making progress on the industrialization of the Cybertruck, which is currently planned for our Austin production subsequent to Model Y." Tesla reiterated its previous target to begin Model Y production builds in both its Berlin and Austin Gigafactories before the end of the year. Both facilities are currently still completing construction.

"Going forward, cutting the red ribbon on Austin and Berlin over the coming months will be key as more supply comes online for Tesla with demand currently outstripping supply for Tesla by roughly 30k vehicles and thus speaking to wait times for cars trending (Model Y) into next spring within the U.S. and Europe," Wedbush's analyst Dan Ives wrote in a note earlier this week.

"We believe in the month of September alone Tesla delivered roughly 150k vehicles and is a clear indicator of this green tidal wave taking hold for Musk & Co. across the board," he added. "We believe China demand rebounded in the quarter and is clear indicator of the step up in EV demand taking place globally with China leading the way."

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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