The passage does not teach salvation by works:

1. the sheep and the goats are already sheep and goats when they stand in judgment before Christ
2. the sheep are called “blessed of My Father” which points to them having already been favored by God
3. the sheep are called to “inherit the kingdom” – we don’t earn or merit an inheritance
4. the sheep are given a kingdom that was “prepared for you from the foundation of the world” (the sheep were elected by God before the foundation of the world [Eph 1:4], and the good works they walk in were prepared for them by God [Eph 2:10])
5. the good works are evidences of the presence of saving faith; good works are the consequence of saving faith in Christ
6. the surprise of the sheep with reference to their blessedness indicates that they were not doing good works in order to be saved; they did them as a consequence of their salvation
7. the continual emphasis in Matthew’s gospel is on salvation by grace through faith (1:21; 7:21-23; 9:9-13; 11:25-30; 20:28)
8. the idea that Jesus taught salvation by faith plus works and Paul taught salvation by faith alone is absurd; it is a rejection of the one way of salvation and destructive of the unity of Scripture, among other things
9. the words of the Apostle Paul in Galatians 2:21 which destroy the notion that a person’s works are involved in justification, “I do not set aside the grace of God; for if righteousness comes through the law, then Christ died in vain.” J. Gresham Machen’s comment on Galatians 2:21 is helpful:
   

   This verse is the key verse of the epistle to the Galatians; it expresses the central thought of the epistle. The Judaizers attempted to supplement the saving work of Christ by the merit of their own obedience to the law. “That,” says Paul, “is impossible; Christ will do everything or nothing: earn your salvation if your obedience to the law is perfect, or else trust wholly to Christ’s completed work; you cannot do both; you cannot combine merit and grace; if justification even in the slightest measure is through human merit, then Christ died in vain.”[1]

The passage does teach –

1. the absolute certainty of judgment to come (cf. Jn 5:22, 27-29; Acts 17:31; Rom 14:10, 12; 2 Cor 5:10; Rev 20:11-15)
2. the glory of Christ as the Judge to come (an allusion to OT texts ascribing judgment to Yahweh; the title “Son of Man;” the self-identification of Christ as the “King” who is the eschatological judge)
3. the separation of the righteous from the wicked on the day of judgment and into eternity
4. the truth that works give evidence to the presence of saving faith (Gal 5:6; Eph 2:8-10; Titus 2:13-14; Jas 2:14-26; 2LCF 16:2)
5. the identification of good works (the talents of vv.14-30) – acts of charity toward God’s people (and the needy in general, cf. Gal 6:10)
6. the necessity for God’s people to engage in such good works. John Calvin comments, “We must be prodigiously sluggish, if compassion be not drawn from our bowels by this statement [v.40], that Christ is either neglected or honored in the person of those who need our assistance.”[2]
7. the two (and only two) places where persons will go for eternity
8. the blessedness of the righteous (with Christ / a prepared kingdom / eternal life)
9. the misery of the unrighteous (the goats are cast away from Christ, a punishment of loss; the goats will go away into everlasting punishment, a punishment of sense)

[1] J. Gresham Machen, Notes on Galatians, ed. John Skilton (1972; reprint, Birmingham: Solid Ground Christian Books, 2006), 161.