Tesla surprises market with Q1 profit

As the auto industry reels from the blow it suffered from the Covid-19 pandemic, Tesla reported a profit for the first quarter.

Lauren Feiner and Lora Kolodny reported the news for CNBC:

Tesla shares rose more than 9% after hours as the company showed its third consecutive quarter with a profit.

Here’s how the company did: 

• Earnings per share (EPS): $1.24 per share, ex-items
• Revenue: $5.99 billion

Wall Street was expecting an adjusted loss of 36 cents per share and revenue of $5.9 billion for Q1, according to a survey of analysts by Refinitiv. However, estimates varied widely and comparing Tesla’s actual results with estimates isn’t straightforward, given the difficulty of predicting the impact of the coronavirus. 

The company reported a GAAP profit during the first quarter of $16 million.

However, Tesla also recorded negative free cash flow of $895 million, which will complicate its previously stated goal of being free cash-flow positive for 2020.

Claudia Assis from MarketWatch wrote:

Tesla TSLA, +4.08% Chief Executive Elon Musk kept the surprises going on a post-results call with analysts, veering off script to condemn the ongoing restrictions put in place to curb the spread of the virus.

Echoing his similar criticism on Twitter, Musk called the orders an “infringement of people’s rights” and likened them to fascism.

Tesla’s sole U.S. vehicle-producing factory in Fremont, Calif., has been shuttered since late March as the San Francisco Bay Area was among the first U.S. regions to issue mandatory shutdowns.

“It’s outrage” that will cause “great harm” not just to Tesla but other companies and suppliers, Musk said in the call.

First-quarter 2020 “was the first time in our history that we achieved a positive GAAP net income in the seasonally weak first quarter. Despite global operational challenges, we were able to achieve our best first quarter for both production and deliveries,” Tesla said in its letter to investors.

The results were “quite impressive, given the difficulties incurred towards the end of the quarter with COVID-19 issues,” Argus Research analyst Bill Selesky said.

CNN’s Chris Isidore wrote:

“It is difficult to predict how quickly vehicle manufacturing and its global supply chain will return to prior levels,” Tesla said in a statement to investors. “Due to the wide range of potential outcomes, near-term guidance of net income and free cash flow would likely be inaccurate.”

Although it did not offer specific guidance, the company did say, “While near term profit guidance is on hold, we believe we will achieve industry leading operating margins and profitability.” It said it has the capacity to build 500,000 vehicles this year, even with the production interruptions. Tesla said it had been on course to have its best sales quarter in its history before it had to suspend operations in California because of the outbreak.

Tesla’s numbers impressed experts, even if they warned that the company will have a tougher time in the current period.