Shares of Tesla Motors, Inc. (NASDAQ:TSLA) fell 2.9% on May 7, after the automaker reported adjusted loss (including stock-based compensation expenses) of 14 cents per share in the first quarter of 2014, deteriorating from break-even results recorded in the year-ago quarter. The loss was wider than the Zacks Consensus Estimate of a loss of 10 cents.
First-quarter 2014 earnings exclude non-cash interest expenses related to convertible notes of 7 cents per share, and deferred gross profit of 15 cents for its Model S cars due to lease accounting. On the other hand, first-quarter 2013 earnings exclude the change in fair value of warrant liability of 9 cents per share. Including these items, the company reported net loss of $49.8 million or 36 cents per share compared with net income of $11.2 million or 9 cents per share in the first quarter of 2013.
Excluding Model S revenues deferred due to lease accounting, top line jumped 27% to $713 million in the quarter from $561.8 million a year ago. Revenues also beat the Zacks Consensus Estimate of $693 million.
Year-over-year improvement in revenues was driven by higher vehicle deliveries. Tesla delivered 6,457 cars in the first quarter. The automaker also benefited from the sales of electric powertrain components to Toyota Motor Corp. (NYSE:TM). Tesla recently started producing powertrains for Daimler AG’s (OTC:DDAIF) Mercedes B-Class, which will further boost revenues in the future.
Gross profit, excluding Model S gross profit deferred due to lease accounting and stock-based compensation expenses, amounted to $179.6 million in first-quarter 2014, against $97.9 million in the year-ago quarter.
Revenues, on a reported basis from Automotive sales, jumped to $618.8 million in the quarter from $555.2 million a year ago. Reported revenues from Development services (producing electric vehicle, powertrain components and systems for other automobile manufacturers) slumped to $1.7 million from $6.6 million a year ago.
Financial Position
Cash flow from operating activities amounted to $61 million in the first quarter of 2014, compared with $64 million in the year-ago period. Capital expenditures increased to $141 million from $58 million in the first quarter of 2013.
Outlook
Tesla expects to record a marginal adjusted profit in the second quarter of 2014. Production volume in the second quarter of 2014 is expected to increase 13–19% from the first quarter of 2014 to 8,500–9,000 cars.
Further, vehicle deliveries are expected to increase to 7,500 from 6,457 cars in the first quarter. However, deliveries are expected to be lower than production due to increase in the number of vehicles in transit to Europe and Asia. Tesla anticipates delivering more than 35,000 vehicles globally in 2014, up 55% over 2013.
Tesla expects production volume to increase to 1,000 cars per week by the end of 2014 from 700 cars per week at present. Increased factory capacity and lower supplier bottlenecks will drive the improvement. The shortage of battery cell supply is expected to reduce by the third quarter.
Adjusted automotive gross margin is expected to increase to 28% by the end of 2014. The company believes that declining parts prices and economies of scale will benefit gross margin.
Operating expenses are expected to increase in the second quarter of 2014. The company believes that research and development expenses will increase 30% sequentially in the quarter. Selling, general and administrative (SG&A) expenses are also projected to increase 15%.
Capital expenses for the year are expected to range between $650 million and $850 million due to increasing production capacity, expansion of stores, service and Supercharger infrastructure, development of Model S and Model X and the Gigafactory construction. The electric carmaker plans to install 200 Superchargers across the world this year. Free cash flow for the year is expected to be negative.
Tesla designs and manufactures electric vehicles and electric vehicle powertrain components for partners such as, Toyota and Daimler. The automaker currently carries a Zacks Rank #5 (Strong Sell). Fox Factory Holding Corp. (NASDAQ:FOXF), a Zacks Rank #2 (Buy) stock, is currently performing well in the automobile industry.