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Jim Cramer: Tesla Sounded Like Ford after Q3 Earnings

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Oct. 25 2019, Published 11:23 a.m. ET

Tesla (TSLA) stock has jumped about 18% on a surprise profit in its Q3 results. The company’s profits have caught Wall Street by surprise, with analysts raising their price targets. Jim Cramer, the host of CNBC’s Mad Money, saw a positive development in Tesla’s results—the company’s leap in China.

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Tesla’s impressive China foray

Cramer seemed impressed by Tesla’s achievement in China. Tesla built its Shanghai Gigafactory 3 in less than 10 months. Plus, it was constructed at a 65% lower cost than its US counterpart. With respect to Tesla’s China foray, Cramer noted in an October 24 CNBC report, “How about China? The fastest to grow, to put up a factory and hire people.”

Tesla believes China could become the largest market for the Model 3. The company plans to price its locally produced Model 3 in competition with gasoline-powered cars in the country. China is one of the biggest markets for mid-sized sedans. So, the company is quite optimistic about the Chinese market.

On the construction of Gigafactory, Tesla’s CEO Elon Musk said during the company’s third-quarter conference call, “As far as I know, this is unprecedented. And Gigafactory Shanghai will become a template for future growth. We’re planning to build model-wise in Shanghai as well of course.”

Ford’s falling China sales

While Tesla seemed all-in on China, Ford reduced its year-end earnings guidance on worsening volumes in the country.

In the third quarter, Ford’s wholesale volumes declined by 12% YoY in China. Also, the company’s Chinese revenues slumped by 27% YoY in the quarter. This is no surprise, as Ford saw a 0.6% reduction in its market share in the region to 2.3%. The company recorded an EBIT loss of $281 million in China in the quarter.

In the automaker’s third-quarter conference call, Ford president and CEO Jim Hackett said, “We’re clearly not satisfied with our standing in China, and the team is working exhaustively to return to profitable growth in this important market.”

On the company’s China performance and North American costs, Ford lowered its full-year EBIT guidance to $6.5 billion–$7.0 billion. The company’s EBIT stood at around $7 billion in 2018.

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Cramer’s views on Tesla and Ford

In yesterday’s CNBC report, Cramer said, “I’ve got to tell you: Ford sounded like Tesla, and Tesla sounded like Ford. Tesla was like listening to a call from a real company that made cars and made money. … It was seamless.”

Since October 23, Ford stock has slumped by 5.2% despite its third-quarter earnings beat. Ford’s adjusted EPS of $0.34 surpassed Wall Street analysts’ earnings estimate of $0.26.

In the same period, Tesla stock has risen by 17.3% against the backdrop of its Q3 earnings. To learn more, please read Tesla’s Terrific Q3 Showing Puts Bears, Critics in a Coma.

Peers’ stock and earnings expectations

General Motors (GM) stock has fallen by 1.3% since October 23. GM stock has been sliding amid its labor troubles. General Motors has also seen an 18% decline in its sales in China in the third quarter. Wall Street analysts expect General Motors’ revenues to fall 6% year-over-year and its EPS to fall 30% YoY in the third quarter.

Fiat Chrysler (FCAU) stock is down 0.2% in the past couple of days. Analysts expect Fiat’s revenues and EPS to fall YoY by 3% and 5%, respectively, in the third quarter.

However, Ferrari (RACE) stock has risen 0.7%. This uptrend could be due to its revenues and earnings estimates. Contrary to its peers, analysts expect Ferrari’s revenues and EPS to increase YoY by 6% and 12%, respectively, in its upcoming results. Ferrari seems to be the least affected by an economic slowdown. To learn more, please read Has Ferrari Stock Become Recession Proof in 2019?

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