Tesla beats the Street again as profits, deliveries, and margins surge

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Tesla has outperformed analyst expectations by not only posting strong delivery numbers but also demonstrating continued improvements in the profitability of each car it delivered.

The electric-car maker Wednesday reported third-quarter revenue of $8.77 billion, up 45% from $6 billion in the second quarter and exceeding analyst expectations of $8.36 billion. Profits more than doubled to $331 million from $104 million in the second quarter.

Adjusted profits, which exclude certain expenses, were 77¢ per share, compared with the 57¢ that analysts had expected.

Tesla shares rose nearly 2% on the news in after-hours trading to around $430, up from a close of $422.

In early October, Tesla said it had delivered 139,300 vehicles in the third quarter. That’s up substantially from 90,650 delivered in the preceding quarter and 97,000 in the third quarter of 2019.

In addition to increasing sales on a sequential and year-over-year basis, Tesla said that its inventory levels continue to decline, indicating faster deliveries. CEO Elon Musk has emphasized the importance of lower inventory levels for Tesla’s profitability, and the latest quarterly profits partly reflect success on that front.

Tesla said automotive gross margins in the third quarter were 27.7%, up from 25.4% in the previous quarter and 22.8% in the third quarter of 2019. That metric is a key measure of an automaker’s sustainable profitability, and it shows that Tesla has made steady progress in bringing down production costs per car.

The latest quarter’s production numbers also mean it’s plausible Tesla could hit a prior goal of producing (as opposed to delivering) 500,000 vehicles in 2020. That goal was set before the production problems and demand uncertainty triggered by the coronavirus, but Tesla declined to revise it downward despite changing circumstances. Tesla would have to produce 170,000 vehicles in the fourth quarter to hit the number, or 17% more than it built in the third quarter.

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