Here’s What to Expect When Tesla Reports Earnings

Tesla CarsThere’s a lot of red on Tesla Motors’ (NASDAQ:TSLA) income statement. The electric-vehicle pioneer has reported negative earnings for pretty much every quarter of its existence, and expectations for the fourth quarter are no different. On average, analysts are looking for a loss of $0.53 per share, 66.6 percent wider than the year-ago period.

But the focus right now is not on earnings. The company’s bottom line is just a function of its revenue and margins — those are the two areas to which investors are really paying attention. Revenue, which has increased consistently on an annual basis but has been jumpy quarter-to-quarter, is finally set to take off. Production of the company’s flagship Model S has shifted up to a reasonable speed, and analysts are looking for nearly $300 million in sales for the quarter.

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Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012*
Revenue ($) in millions 39.38 30.17 26.65 50.10 298.90
Diluted EPS ($) -0.79 -0.86 -1.00 -1.05 -0.53

*Average analyst estimate

tesla model sThe strong fourth-quarter is expected to bring full-year revenue to $403.15 million, according to the mean analyst target, which is at the low end of the $400-$440 million guidance offered by the company. If reality is in line with expectations, Tesla is set to double its 2011 revenue. But the bad news, the product of aggressive retail expansion and production delays, is an expected full-year earnings loss that is wider than the previous year.

The operative questions are: how many cars can Tesla sell, and how much money does it earn per car? Winning Motor Trends’ coveted Car of the Year award for 2013 has helped create a backlog of orders worth as much as $1 billion, positively answering the first question. However, the second question is more troublesome. For the fourth quarter, cost of goods was 117 percent of revenue, yielding negative gross income before SG&A expenses. EBITA growth for three out of the past four quarters has been negative.

But there’s always good news buried with the bad. Tesla has logged gross margins over 30 percent for four consecutive quarters. The company has targeted a 25 percent gross profit margin for 2013, and it’s well on its way.

Fiscal Year 2009 2010 2011 2012*
Revenue ($) in millions 111.94 116.74 204.24 $403.15
Diluted EPS ($) -7.94 -3.04 -2.53  -3.08

*Average analyst estimate

There’s also no hiding the fact that Tesla has attracted a lot of attention this year to date. The stock is up 16.5 percent, way ahead of Ford (NYSE:F) at 1.6 percent gains and General Motors (NYSE:GM), which has fallen to a year-to-date loss of 1.25 percent. Average trade volume has also been slowly increasing since the start of the New Year.

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