Tesla reports first quarterly profit in more than three years

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SAN FRANCISCO Tesla Motors Inc (TSLA.O) reported its first quarterly net profit in more than three years on Wednesday, buoyed by nearly $139 million in sales of clean car credits, and Chief Executive Elon Musk said the company could also turn a profit in the fourth quarter.

The Silicon Valley electric car company stood by its earlier target to produce 50,000 cars in the second half of the year, and made good on a promise to improve quarterly gross margins. It also reported generating $176 million in free cash flow.

Tesla reiterated that the mass-market Model 3 sedan was on plan for deliveries in the second half of 2017. The Model 3 has a starting price of $35,000, about half the price of the current Model S sedan.

Tesla said it planned capital spending of $1.8 billion for the year, with just over $1 billion of those outlays coming in the fourth quarter. However, that new total capital spending forecast for this year is about 20 percent lower than the automaker's previous forecast of $2.25 billion.

The third quarter profit and leaner capital spending plan could be ammunition for Musk should he seek to raise cash from capital markets in the next year to fund the Model 3 launch, as most analysts expect.

"It also reported generating $176 million in free cash flow.Tesla reiterated that the mass-market Model 3 sedan was on plan for deliveries in the second half of 2017"

Tesla's results were lifted by $139 million in sales of California zero emission vehicle credits. Rival automakers can buy the credits rather than sell electric cars of their own. That was comparable to what the company booked from sales of so-called ZEV credits for all of 2014, said Cowen analyst Jeffrey Osborne.

"Certainly what drove the upside on profit is the $139 million of those zero emission credits which is a near 100 percent profit business," said Osborne.

Tesla said it had $3.08 billion in cash and cash-equivalents as of Sept. 30, compared with $3.25 billion at the end of the second quarter.

The automaker's shares initially rose 6.2 percent in after-hours trade but gave back some of those gains and were trading at about $211 a share, up 4 percent from the closing price of $202.24.

Tesla recorded net income of $21.9 million, or 14 cents per share, for the third quarter ended Sept.

30 compared with a loss of $229.9 million, or $1.78 per share, a year earlier. Total revenue more than doubled to $2.30 billion.

(Reporting by Narottam Medhora in Bengaluru and Alexandria Sage in San Francisco; Editing by Ted Kerr, Joseph White and Tom Brown)