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Rivian Q4 Earnings: Soft Production Forecast Overshadows Improving EPS, Revenue

By Shane NeagleStock MarketsMar 01, 2023 01:21PM ET
www.investing.com/analysis/rivian-q4-earnings-soft-production-forecast-overshadows-improving-eps-revenue-200635801
Rivian Q4 Earnings: Soft Production Forecast Overshadows Improving EPS, Revenue
By Shane Neagle   |  Mar 01, 2023 01:21PM ET
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Shares of Rivian Automotive Inc (NASDAQ:RIVN) trade lower on Wednesday after the U.S. electric vehicle (EV) company reported mixed financial results for Q4 2022.

The company reported an adjusted loss per share of $1.73 in the quarter, narrower than the estimated loss per share of $1.94. The EV maker generated a revenue of $663 million in the quarter, well below the consensus estimates of $742.4M. This compares with Rivian’s revenue of $54M in the year-ago period when the company started making its first products.

Rivian posted an adjusted loss before interest, taxes, depreciation, and amortization of almost $5.2 billion in 2022, less than the company’s guidance of a $5.4B loss in November. The Irvine, California-based car manufacturer reported roughly $12.1B in cash remaining at the end of the last quarter, down from $13.8B in Q3 and $15.5B in the quarter before that. Rivian’s capital expenditures for Q4 2022 stood at $294M, down from $455M in the same quarter last year.

Soft Production Forecast

Going forward, Rivian said it expects to produce around 50,000 vehicles in 2023, which would be around double the production figures from last year, though below consensus projections of 60,000.

“Supply chain continues to be the main limiting factor of our production; during the quarter we encountered multiple days of lost production due to supplier shortages. We expect supply chain challenges to persist into 2023 but with better predictability relative to what was experienced in 2022,” the company said in its letter to shareholders.

The EV startup said it expects to reach positive gross profit in 2024. Its net loss in Q4 was reported at $1.7B, narrower than the $2.5B loss it reported in the year-ago quarter.

Rivian’s mixed quarterly report comes on the heels of numerous headwinds the EV maker had faced in the past including tepid production and strong pricing pressures, which forced the company to take steps to conserve cash.

The EV company said even though inflation has added to its supply chain challenges, it plans to continue ramping up production and slashing material costs by trimming its engineering and vehicle design, as well as taking measures to reduce commercial expenses. Rivian said it will focus on expanding production of its R1 truck and SUV, as well as the electric delivery van the company manufactures for its biggest shareholder, Amazon (NASDAQ:AMZN).

Job Cuts to Offset EV Slowdown

Last month, Rivian announced it is reducing 6% of its workforce in an effort to preserve cash as the company prepares for a potential industry-wide price war. U.S. automotive giants Tesla (NASDAQ:TSLA) and Ford Motor (NYSE:F) recently unveiled significant price cuts, giving rise to concerns that other automakers may have to make similar moves amid intensifying competition in the EV market.

RJ Scaringe, Rivian’s CEO, told the employees via email that improving operating efficiency is the company’s top priority. Scaringe noted that the layoffs would not affect jobs at Rivian’s plant in Illinois.

Tesla’s decision to slash the prices of some of its flagship models in January was not expected by many in the industry. The move spurred demand for Tesla’s vehicles as TSLA stock is now up over 90% YTD. It also put additional pressure on rivals that were already having a difficult time trying to steal some of Elon Musk’s market share.

Ford Motor followed suit, cutting the price of its Mustang Mach-E by as much as $5,900. Other major manufacturers such as General Motors Company (NYSE:GM) and Volkswagen (OTC:VLKAF) (ETR:VOWG_p) have not announced any similar moves yet, saying they do not intend to cut prices for their EVs. Tesla and Ford’s price reductions mean these companies will deprioritize profitability for a while, raising concerns among industry analysts.

Rene Lipsch, VP and Senior Credit Officer at Moody’s, believes the cuts emphasize:

“the conundrum facing automakers of improving the profitability of electric vehicles by increasing production volumes in a competitive marketplace.”

However, some believe that a pricing war could be a good thing for the car industry’s $1.2 trillion foray into electrification through the end of this decade, as well as for the consumers interested in battery-powered vehicles.

"Anytime you have competition in the space, that could represent some pricing pressures which is not as great for the automakers, in the short term as much as it is for, potentially, the consumer," said Ed Egilinsky, managing director at financial products provider Direxion.

Still, even after recent efforts by automakers to reduce prices, the majority of consumers find EVs too expensive. According to Kelley Blue Book, the average selling price of an EV stood at $61,448 in December.

But a potential pricing battle, along with fresh EV tax credits by the US government, could help drive demand for battery-powered cars and help manufacturers boost volume.

"Scale will contribute towards parity in price...We need to build more EVs and batteries before we get the prices down," said Steve Patton, EY Americas mobility sector leader.

Summary

EV maker Rivian shares trade lower this week after the company reported Q4 results and especially disappointed investors by offering a weaker-than-expected production forecast for 2023. The latest earnings report comes after Rivian slashed jobs and said its focus is now on improving operating efficiency as it faces a slowdown in EV demand globally.

. . .

Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.

Rivian Q4 Earnings: Soft Production Forecast Overshadows Improving EPS, Revenue
 

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Rivian Q4 Earnings: Soft Production Forecast Overshadows Improving EPS, Revenue

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JIM VETTER
JIM VETTER Mar 23, 2023 9:17AM ET
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Rivian will never survive
 
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