Tesla’s Earnings Smashed Forecasts Again. Hello, S&P 500.

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Elon Musk has done it again, beating Wall Street’s expectations for
Tesla’s
earnings significantly for the fourth quarter in a row.

The electric-vehicle maker company (ticker: TSLA) reported adjusted earnings per share of $2.18, and a profit under generally accepted accounting principles, or GAAP, of 50 cents a share. Analysts were looking for results near the break-even line.

It’s hard to be more precise because earnings estimates on Tesla have been all over the place for the pandemic-affected second quarter. Estimates started the year out at a profit of $1.90 a share, dipped to a loss of about $1.40, before recovering to break even by the time earnings actually rolled around on Wednesday.

The adjusted earnings are nice for stockholders, but it is the GAAP profit that most investors will focus on. With the second quarter in the books, Tesla has been profitable on a rolling 12-month basis and profitable in the most recent quarter. Both are key criteria for inclusion in the
S&P 500
index.

Shares are up 3.3% in after hours trading, just after earnings hit the tape. It’s a relatively small move for Tesla.

What happens next is anyone’s guess. Tesla stock actually closed 2.3% lower after the company reported strong first-quarter results. Investors have come to expect a lot from Tesla.

Tesla posted the solid results, in part, by generating solid profit margins in the automotive business. Automotive gross profit margins were about 25%, and 17% excluding credits Tesla earns as a zero-emission vehicle producer.

Gross profit margins were up about 6 percentage points year over year and flat compared with the first quarter of 2020. Bearish investors may focus on how margins were boosted by regulatory credits, but offsetting that is the fact that Tesla’s factory in Fremont, Calif., was shut down for part of the quarter as a result of the pandemic.

Free cash flow generated in the second quarter was $418 million, much better than analysts predicted.

Better than predicted is a common theme for Tesla these days. The Street didn’t know what to expect for the second-quarter numbers. Although the average among calls indicated that Tesla would more or less break even, the highest estimate was for a profit of $1.45 a share. The lowest estimate was a loss of $2.53 a share.

Wall Street rarely agrees on Tesla earnings, or Tesla stock. Analysts’ price…