What Tesla's Q2 delivery beat represents ahead of earnings

Tesla (TSLA) shares have shifted gears and are revving higher in Tuesday's session after beating second quarter EV delivery estimates. The EV maker reportedly produced 410,831 vehicles while delivering 443,956 vehicles. Tesla still contends with price wars from overseas EV manufacturers in the Chinese auto market.

Market Domination welcomes Barron's Associate Editor Al Root to talk about the electric vehicle maker's delivery figures and what it may indicate for Tesla's next earnings report on July 17 and its vehicle pricing.

"Part of how they did it is basically just meeting lowered expectations or beating lowered expectations. Estimates always tend to fall headed into the print, that certainly happened this time as well," Root says. "So it was a good quarter, and again, I just think there was so much anxiety over two consecutive year-over-year declines."

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This post was written by Luke Carberry Mogan.

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Tesla shares jumping as the EV giant reports upbeat results for deliveries at Wall Street and pleasantly surprised with the lower than expected decline of nearly 5% in deliveries compared to just a year ago.

Joining us.

Now to discuss, we want to bring in Baron's associate editor Al Root Al.

It's good to see you.

So let's talk about these numbers that we're just getting out here from Tesla because coming in better than expected when you take a look at the market's reaction, clearly, they were very excited about uh the print that was uh published this morning.

So what does that tell us just about where Tesla stands is the worst over for Tesla?

Yeah, I I think that if you look at the reaction today, the message is sort of the worst is over.

Um several notes from Wall Street basically indicate that.

And you know, one of the interesting questions I got early in the day was, well, how did they do it?

I mean, it was a very good quarter better than the first quarter where they delivered about 387,000.

Uh but like that graphic shows it's still down year over a year.

So part of how they did it is basically just meeting lowered expectations or beating lowered expectations.

Estimates always tend to fall headed into the print that certainly happened this time as well.

So it was a good quarter.

Um And again, I just think there was so much anxiety over, you know, two consecutive year, over year declines.

How bad is it gonna be?

Is it gonna be 420,000 units?

You know, it wasn't that bad.

Al next next date on the calendar for Tesla investors, July 23rd earnings day.

What are you expecting to hear there?

Al are there certain metrics you're gonna make a beeline for in that print?

I'd like.

Well, so, you know, the the deliveries are connected to that, right?

You know, they also did 9.4 gigawatt hours of storage.

Um You know, that goes in their other business category.

That was a, that was a record for a quarter by, you know, more than 100%.

So that's more revenue.

Um And then with uh with the deliveries being a little better than expected, I will go right to that operating profit margin, but they did about 5.5% operating profit margins in the first quarter.

Uh Down from about 11% a year ago, margins have been steadily marching lower as they've lowered prices and growth has slowed.

Uh So I would like to see that turn around the streets expecting about 8%.

So the street expects some improvement.

Uh so we look at operating margins and we will look for like the reversal in earnings estimate declines.

This delivery result is good enough where earnings estimates didn't have to be cut into the quarter.

And you can expect sort of, you know, the standard beat, you know, and look forward to the rest of the year, you know, Q one, Q two being the worst part of the year and then establishing this idea that Tesla can grow again in the back half and then in 2025.

Yeah, so I, with, with that in mind, I guess my question is on pricing.

Then do you think the pricing wars that have played out that Tesla has had to lower prices on vehicles really across the world?

That maybe that isn't going to be as big of a driving factor here when we talk about some of the pressure that, that has put on margins.

Well, interestingly, uh to your point, Tesla produced far fewer vehicles than it's sold.

So Tesla's inventories are lower so that, that lowers the pressure for them to cut their prices uh further to clear up some of that inventory, but they are only one, right?

They're about 50% of the US, they're about 20% globally of all electric vehicle sales.

So, um you know, other people have to play along uh uh ev growth in China has been better.

But again, that's partially been boosted by pricing.

I think the same thing to say is uh pricing is probably gonna bump along the bottom.

So it's not necessarily going to be the pressure.

It was in 2023 and early in 2024.

Uh some of the delivery results not only from Tesla, but Rian Neo XB Lee Byd indicate that, that uh that vehicles are being sold at these levels.

So, you know, car companies might say to themselves, ok. You know, we're good, we can just sort of operate at these levels.

But again, it's not totally up to Tesla, at least from their perspective, there's less pressure to keep cutting prices.