Tesla ($TSLA.OQ) stock is rising after reporting a double-digit year-over-year increase in earnings per share. Elon Musk’s company reported adjusted earnings of $2.27 per share on $16.93 billion in revenue in Q2 2022. The earnings per share (EPS) ratio was well above the expected $1.81, which sparked a wave of optimism among shareholders, investors, and traders. However, the second-quarter earnings report confirmed growing fears of economic regression.
Highlights from the Q2 earnings report:
- Earnings per share (EPS) ratio: $2.27 (adjusted) vs $1.81 expected.
- Revenue: $16.93 billion, vs. $17.1 billion expected.
- Automotive gross margin came in at 27.9%, down from 32.9% last quarter and 28.4% a year ago.
Tesla’s revenue beat expectations
As you have already realized, Tesla was able to achieve an increase in earnings per share. Nevertheless, the company has encountered some difficulties.
In Q2 2022, we achieved record production rates across the company. However, we saw a continuation of manufacturing challenges related to shutdowns, global supply chain disruptions, labor shortages and logistics and other complications, which limited our ability to consistently run our factories at full capacity, — Tesla states.
This was probably the reason for the decline in profitability of car production. Automotive gross profit margins, excluding regulatory credits Tesla earns by selling more than its fair share of zero emission vehicles, came in at about 26%, down from 30% in the first quarter. Still, margins were a little better than the Street projected.
Tesla’s gross profit is better than its automotive peers. General Motors (GM) and Volkswagen (VOW3. Germany) are expected to generate Q2 gross profit margins of roughly 16% and 18%, respectively. Accordingly, Tesla is performing quite well, even against the backdrop of reduced profitability and logistical problems.
What to expect from Tesla shareholders
Tesla stock price chart as of July 21, 2022
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After all, the company continues to have positive potential for productivity growth, as well as revenue and net income. Despite declining profitability in automotive manufacturing, the company has been able to offset costs through increased production of popular Tesla models.
Tesla’s CEO reported that in June, Tesla’s Berlin factory surpassed 1,000 cars per week. Elon Musk also expects the new factory in Austin to surpass 1,000 cars per week milestones within the next few months. Regarding charging stations and store locations, Tesla has 19% more locations than last year, as well as 34% growth in the number of charging locations.
These plans look optimistic, which may indicate the possibility of further revenue growth. Nevertheless, potential investors and shareholders should include global economic risks in their earnings forecasts.
Tesla’s next quarterly earnings report will be released in October 2022. It will shed light on the company’s development trend. If the automobile giant manages to maintain positive dynamics, it will confirm the sustainability of the automaker’s economic model.
Summary
- Tesla’s Q2 2022 earnings report was impressive, to say the least.
- The company reported an earning Q2 per share (EPS) ratio of $2.27 vs $1.81 expected.
- Automotive revenues made up $14.6 billion of the company’s total, with $1.47 billion coming from services and other revenue, and $866 million from the company’s energy segment.
- Shares of Tesla surged following the release of the earnings report.
