Tesla’s Earnings Beat Was Better Than You Think. Here’s Why.

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Tesla’s quarterly earnings call had everything: Robots, self-driving car claims, production updates and more. All that might have distracted investors from an important, but mundane, factor that impacted fourth-quarter results: payroll taxes.

Even as Tesla (ticker: TSLA) reported better-than-expected earnings, the payroll taxes, triggered by CEO Elon Musk exercising management stock options, weighed on reported results. Accounting for that makes the quarter look much better than headlines suggest.

Taxes certainly aren’t as interesting as much of what was talked about on the call. Musk said the company wasn’t working on a lower-priced ($25,000), electric vehicle right now. There will also be no new models introduced in 2022. That means no Cybertruck until 2023. Increasing output is the company’s singular focus for this year.

Musk also said he believes that Tesla can achieve truly self-driving cars by the end of 2022. What’s more, Musk believes business generated from self-driving technology will make Tesla’s existing car business look small. He also believes the robot Tesla is working on, dubbed Optimus, could also make the vehicle business look small.

Still, Tesla stock was down a little in premarket trading. Shares were off about 1.2% at $926 a share. S&P 500 and Dow Jones Industrial Average futures were both down about 0.1%.

Investors might have wanted the Cybertruck sooner, but they also might have wanted a bigger earnings “beat.” They may have gotten it without knowing.

Tesla reported $2.54 in adjusted per-share earnings. Analysts were expecting $2.36. But Tesla’s adjusted per-share earnings included $340 million in payroll taxes triggered by Musk’s stock options activity. Musk exercised billions in expiring options at the end of 2021.

That could be up to 30 cents in after-tax per-share earnings. With that added back ,Tesla’s earnings were $2.84 a share. That’s 20% better than Wall Street was projecting and looks better than the 8% beat Tesla’s reported numbers implied.

To be sure, it isn’t a great idea to rework already adjusted numbers to arrive at a rosier picture. And Tesla didn’t respond to a question about the payroll tax impact. Still, Musk exercising options has only had a significant impact in one period in the past 10 years since the stock options award.

A better earnings “beat” doesn’t ensure the stock will go up Thursday. Tesla had beaten Wall Street earnings estimates in seven of the past eight quarters reported coming into the fourth-quarter release. The stock has risen three times following those earnings.

Tesla is a high-expectation stock. Investors always need very good news to keep shares moving higher.

Write to Al Root at

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