Tesla Reports Second-Consecutive Profit; CFO Retires Again

Rei writes: Yesterday, Tesla reported their 4th quarter earnings, representing their second consecutive profit. While earnings per share missed analyst expectations ($1.93 vs. $2.20), revenue beat expectations by around $100 million and free cash flow ($910 million) was more than double the First Call consensus of $395 million. Model 3 margins were maintained at an impressive 20% level despite significant reductions in the average sale price in Q4; labor hours fell by 20% in Q4 and 65% in the second half of 2018 alone. With $3.7 billion in the bank, Tesla is now well positioned to repay its $920 million March convertible bond obligations in cash. Severance costs and an increase in inventory in transit due to shipments to Europe and China are expected to hurt Tesla's profits in Q1, but guidance for Q2 onward in 2019 is strong. Highlights planned for 2019 include introduction of faster V3 Supercharging early in the year, Model Y and pickup unveiling in the middle of the year, base Model 3 unveiling in the middle of the year, and full-vehicle production in the under-construction Shanghai Gigafactory by the end of the year -- the first wholly foreign-owned auto plant in China, which has seen extensive governmental support. Despite a generally positive earnings report and conference call, the atmosphere was soured by the news that Tesla's 11-year Tesla veteran CFO Deepak Ahuja was re-retiring. Having previously retired in 2015, Deepak returned to Tesla in 2017 to replace outgoing CFO Jason Wheeler. Ahuja will remain with the company for several months as CFO and then become a senior advisor, while his protege Zach Kirkhorn fills his role. The market reacted negatively to the news, with Tesla trading down 4.5% premarket.

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