A cardboard cut-out of Elon Musk, co-founder and chief executive officer of Tesla Inc., stands on display at the Moscow Tesla Club in Moscow, Russia. (Photographer: Andrey Rudakov/Bloomberg)

Tesla Earnings Shrink as Musk Cuts Jobs to Protect Profitability

(Bloomberg) -- Tesla Inc. reported earnings that fell short of analysts’ estimates as Chief Executive Officer Elon Musk cuts jobs to keep the electric-car maker profitable.

  • Adjusted net income was $1.93 a share for the fourth quarter, trailing analysts’ average estimate for $2.10 a share. Tesla’s earnings are coming under pressure as it introduces cheaper versions of the Model 3 sedan to keep deliveries growing.

Key Insights

  • The restructuring announced earlier this month will trim about $400 million in costs annually, a key driver behind Musk’s bet that Tesla can stay profitable on a GAAP basis every quarter after the three months ending in March.
  • Free cash flow was about $910 million, up from $881 million in the previous three months. With Tesla now past a period of “production hell,” its balance sheet is looking healthier. It now has about $3.7 billion in cash and equivalents.
  • As Tesla takes the Model 3 global starting this quarter, it’s warning that North American deliveries of the crucial sedan may decrease from the last three months of 2018. Production of cars destined for Europe and China began this month.
  • It’s also going to be trickier for Tesla to get cars into consumers’ driveways quickly. Because of longer overseas transit times, the company is expecting to deliver about 10,000 fewer vehicles than it produces this quarter.
  • Tesla had $793 million in customer deposits as of the end of 2018, down from $906 million in late September. Musk is likely to face questions from analysts about how many would-be customers are holding out for the $35,000 version of the Model 3 that the company has long promised -- and hasn’t introduced.

Market Reaction

  • Tesla shares fluctuated after the close of regular trading and were little changed as of 4:33 p.m. Wednesday in New York.

Get More

  • Musk expects to deliver between 360,000 and 400,000 vehicles this year, up as much as 65 percent from last year, he wrote in a letter to shareholders. He and Chief Financial Officer Deepak Ahuja didn’t give a breakdown by model.

©2019 Bloomberg L.P.