Tesla Consecutively Beats Analyst Estimates In Second Quarter Earnings

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Electric automobile and renewable energy products manufacturer Tesla Inc (NASDAQ:TSLA) is out with its earnings results for the second quarter of the fiscal and calendar year 2020 (Q2 FY2020). The company has earned $6 billion in revenue and $451 million in non-GAAP net income during the quarter, indicating that investor optimism about the company's ability to turn a profit in the second quarter was justified.

Heading into today's earnings release, Wall Street analysts polled by Yahoo Finance had expected Tesla to earn $5.23 billion in revenue and $0.11 in loss-per-share. Looking at the results, it's evident that Tesla has beated these estimates by a good margin in a quarter that saw it struggle to deal with the coronavirus pandemic, despite beating Wall Street estimates for vehicle deliveries, as deliveries in Tesla's key California market dropped significantly. Tesla's GAAP and non-GAAP EPS for the quarter stands at 0.50 and 2.18 respectively, highlighting the extent of today's consecutive analyst beat.

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For Tesla, this earnings release held particular importance as it by showing a profit in it, the company could finally secure a place in the Standard and Poor 500 stock market index. Looking at the results, it's clear that the company is one step closer to this milestone.

($) Millions, except YoY & Sequential changes.Q2 FY2020Q1 FY2020Q2 FY2019YoYSequential
Revenue 6,0365,9846,350(5%)1%
Gross Profit1,2671,23492138%3%
Operating Income327283(168)(295%)16%
Net Income10416(408)(125%)550%
Earnings Per Share0.50.09(2.31)(122%)456%

During its first quarter, Tesla, like other companies had struggled to keep its facilities open and its operations running. Since its primary source of income is manufacturing and selling vehicles, Tesla needed deep pockets to sustain operations at a time when purchasing powers dropped all over the glove. Therefore, free cash flows became of paramount importance during the quarter and in the previous quarter, this crucial metric wasn't too rosy for the Palo Alto, California-based automaker.

During its latest quarter, the company has reported positive free cash flows of $418 million, with the figure down year-over-year and up sequentially. Speaking about Tesla's cash position at the start and at the end of its previous quarter, it has added $535 million in the quarter to its cash and cash equivalents.

Operating expenses for Tesla's June quarter stood at $940 million, indicating a drop over Q2 FY2019, and drop over Q1 FY2020. Given the current coronavirus situation, it's natural that the operating expenditure has exhibited this trend, as the automaker cuts down costs and trims manufacturing.

A snapshot of Tesla earnings for Q2 2020.

Taking a brief look at Tesla's operating summary, it's clear that production during the coronavirus quarter has resulted in inventory reduction. At the end of its first quarter, Tesla's inventory was the highest since its second quarter of the fiscal year 2019 (Q2 FY2019), and currently, this has dropped as the company reduced its production and shipped more vehicles during the second quarter.

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Before the earnings call in which company management and Wall Street analysts hash it out, Tesla is yet to provide an update to its vehicle delivery estimates for 2020. The company expects to ship half a million vehicles by the end of this year, with Wall Street analysts expecting it to miss these estimates given the current economic uncertainty. The company's statement for the matter present in its earnings presentation reads,

"We have the capacity installed to exceed 500,000 vehicle deliveries this year, despite recent production interruptions. While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target."

At the end of its previous quarter, Tesla delayed providing an update to this. metric and maintained that its installed vehicle production capacity was capable of exceeding the half a million vehicle delivery mark.

Following today's earnings release, Tesla Inc (NASDAQ:TSLA) is up 5% in aftermarket trading. Over the course of the last thirty days, the stock has shown a meteoric rise on the open market as it has grown by more than 50% and crossed both the $1,000/share and $1,500/share price thresholds.

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