Despite Tesla and Boeing’s reported weak earnings results, the market reaction was positive, contrary to Mad Money’s host’s opinion.
- Jim Cramer’s reaction: Despite Tesla’s disappointing figures and Boeing’s modest performance, Cramer’s response appeared exaggerated, with Tesla’s stock surging despite missed expectations and Boeing’s only seeing a slight rise.
- Tesla vs. Boeing: Tesla’s challenges with EPS and revenues were offset by optimism from Elon Musk’s production plans, while Boeing faced EPS struggles amid the 737 Max crisis. Despite Boeing’s declining deliveries, efforts to improve production processes were noted.
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Cramer’s Reaction to Tesla’s and Boeing’s Earnings Results
Mad Money’s host, Jim Cramer, has shared his opinion on X/Twitter about the results of Tesla, a giant EV maker, and Boeing, an airplane manufacturer.
Tesla and Boeing horrendous cash flow figures and people love them. Everything that is happening this morning smacks of fiction not fact and no one cares!!!!!!
— Jim Cramer (@jimcramer) April 24, 2024
Cramer’s overreaction can be explained by the following: Shares of Tesla opened the trading session on April 24th, surging as much as 12% as the market positively reacted to the earnings call led by Elon Musk, despite the company failing to surpass Wall Street estimates on EPS and revenues. Adding to the disappointment, Tesla reported a negative free cash flow of $2.5 billion, while the Street had anticipated a positive figure of $800 million. Ouch!
On the other hand, Boeing’s stock rose less than 1%, even though it reported EPS results below Wall Street consensus amid the 737 Max crisis. Earlier in 2024, Boeing faced a high-profile door plug blowout, which led to the grounding of its 737 Max 9 fleet, increased scrutiny of the plane maker’s 737 production and safety processes, and decreased overall plane production.
The plane maker reported a negative operating cash flow of $3.36 billion, compared to a loss of $318 million last year, and a negative free cash flow of $3.92 billion, compared to a loss of $787 million last year.
However, the relatively muted reaction to Boeing’s results can be explained by its negative free cash flow of $500 million, which is better than the consensus had expected.
(Read also: Bitcoin: Is The Halving Event A “Nothing Burger”?)
Delving Deeper into TSLA and BA Stock Reactions
Tesla reported an adjusted EPS of 45 cents, falling short of the expected 51 cents, and revenues of $21.30 billion, which is below the anticipated $22.15 billion, according to the LSEG consensus. Revenue declined from $23.33 billion a year earlier to $25.17 billion in the fourth quarter. Net income decreased by 55% to $1.13 billion, or 34 cents a share, from $2.51 billion, or 73 cents a share, compared to a year ago. The drop in sales was even steeper than the company’s last decline in 2020, attributed to disrupted production during the Covid-19 pandemic. Tesla’s automotive revenue declined by 13% year over year to $17.38 billion in the first three months of 2024.
Wall Street’s positive reaction, however, stemmed from Elon Musk’s announcement during the call that the company plans to commence production of new models in “early 2025 if not late this year,” deviating from the previous expectation of starting in the second half of 2025.
Wedbush technology analyst Dan Ives anticipated Tesla’s Q1 earnings call as one of the company’s most crucial moments. According to Ives, “Tesla needs an adult in the room, and Musk was the adult in the room in this conference call.”
Additionally, the analyst noted that the prospect of accelerating a sub-$30k vehicle model was music to investors’ ears. Ives remarked, “Investors were expecting a disaster; instead, there’s a pilot on a plane navigating, and it’s not Ted Striker.”
"Tesla needed an adult in the room, and @elonmusk was the adult in the room," says @divestech as shares of Tesla surge following a renewed push for affordable models. $TSLA pic.twitter.com/triAAGBwuq
— Last Call (@LastCallCNBC) April 23, 2024
Regarding Boeing, shares had a cautious but positive response following the earnings release. Unlike Tesla, Boeing exceeded revenue estimates, reporting $16.57 billion, surpassing forecasts of $16.25 billion, despite an 8% decline from a year ago. However, Boeing reported a first-quarter core (or adjusted) loss per share of $1.13, narrower than the estimated $1.72.
Boeing’s CEO, Dave Calhoun, stated that the quarter’s results reflect immediate actions to decrease 737 production and enhance aircraft quality. Calhoun said, “We will take the time necessary to strengthen our quality and safety management systems, and this work will position us for a stronger and more stable future.”
According to Brooke Sutherland from Bloomberg, the significant point in Boeing’s quarter was % decline in commercial airplane deliveries by 36%. Sutherland commented, “That just speaks to how slow Boeing is going right now as it tries to finally get its arms around its quality control issues and make sure that the FAA is satisfied. But if it’s not delivering planes and not collecting cash on those aircraft, that’s why you’re ending up with this negative free cash flow in the quarter of about 3.9 billion. Now, that could have been worse, quite frankly, and it’s certainly positive to hear Boeing talking about being able to clear out its inventory by the end of the year.”
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content)
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