Al Root
Shares of Chinese electric vehicle maker Li Auto fell early Thursday after the company reported better-than-expected third-quarter numbers. Guidance is the issue.
The Chinese EV market is still growing, but that growth is coming at a price.
Thursday morning, Li announced earnings per share of 26 cents from sales of $6.1 billion. Wall Street was looking for 19 cents and $5.9 billion, respectively, according to FactSet. A year ago, Li reported EPS of 23 cents from sales of $4.8 billion.
Li generated free cash flow of about $1.3 billion in the third quarter. It ended the quarter with about $15 billion on its balance sheet.
Sales rose 24% year over year as deliveries grew 45% from about 105,000 cars to about 153,000 cars. Unit sales rising faster than revenue is a sign of price competition that has plagued the Chinese car industry all year.
Pricing has impacted profit margins. Li's vehicle margin came in at 20.9% in the third quarter, down 0.3 percentage points year over year, but up 2.2 percentage points from the second quarter.
Looking ahead, Li expects to deliver 160,000 to 170,000 cars in the fourth quarter. The midpoint, at 165,000, is up about 25% compared with 2023. Sales are expected to come in between $6.2 billion and $6.5 billion. The midpoint, $6.35 billion, is up about 9% compared with the fourth quarter of 2023.
The guidance looks a little light. Wall Street currently projects fourth-quarter sales of $6.7 billion.
Li's U.S.-listed American depositary receipts were down 5.5% in premarket trading at $27.36, while S&P 500 and Dow Jones Industrial Average futures were down 0.8% and 0.5%, respectively.
Coming into Thursday trading, ADRs were down about 23% this year. Falling EV prices have weighed on investor sentiment. ADRs fell 16% after second-quarter earnings were reported in August.
Management hosts a conference call at 8 a.m. Eastern time to discuss the results. Analysts and investors will want to hear more about China's EV demand and how competition impacts pricing and profit margins.
Li's results aren't hitting other EV stocks in early Thursday trading. NIO shares were down about 0.4% in premarket trading. XPeng shares were up 1.4%. Tesla shares were down 0.5%.
Tesla sold about 181,000 cars in China in the third quarter, a record and up 30% year over year.
Write to Al Root at allen.root@dowjones.com
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(END) Dow Jones Newswires
October 31, 2024 06:58 ET (10:58 GMT)
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