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Will Progress in Production Aid Tesla's (TSLA) Q4 Earnings?

Zacks Equity Research

Tesla, Inc. TSLA is scheduled to report fourth-quarter and 2018 earnings on Jan 30, after the market closes. In the last reported quarter, this electric carmaker delivered positive earnings surprise.

In the trailing four quarters, the company missed estimates once and beat on the other three occasions.

In the past six months, shares of Tesla have outperformed the industry it belongs to. Over this time, shares of the company have increased 0.5% against the industry’s decline of 5%.

Let’s see, how things are shaping up for this announcement.

Tesla, Inc. Price and EPS Surprise

 

Tesla, Inc. Price and EPS Surprise | Tesla, Inc. Quote

Factors Influencing This Quarter

Tesla’s vehicle production and delivery numbers witnessed sequential rise of 8% in fourth-quarter 2018. During the quarter ending on Dec 31, the company manufactured 86,555 vehicles and delivered 90,700 vehicles. Out of the total delivered vehicles, Tesla’s Model 3 accounted for 63,150 units while Model S and X were 13,500 and 14,050 units, respectively.

In fact, Tesla delivered 245,240 vehicles in 2018, consisting 145,846 units of Model 3, and 99,394 units of Model S and X. The actual deliveries of Model S and X missed the set target of 100,000 units.

During the fourth quarter, all Model 3 deliveries, comprising a mid-to-high price range, were delivered only in North America. Apart from catering to reserved bookings in the region, the company delivered the model to new customers.

Nevertheless, high costs associated with Tesla’s Model 3 ramp-up are likely to have some negative impact on results. In fact, higher mix of Model 3s in the company’s automotive sales mix may have some negative impact on the gross margin in the short run.

The Zacks Consensus Estimate for Total Automotive revenues for the soon-to-be-released quarter is pegged at $6.4 billion. The company registered Total Automotive revenues of $6.1 in third-quarter 2018.

The Zacks Consensus Estimate for Energy, Generation and Storage revenues for the soon-to-be-released quarter is pegged at $403 million. The company registered Energy, Generation and Storage revenues of $399 million in third-quarter 2018.

The Zacks Consensus Estimate for Services and Other revenues for the soon-to-be-released quarter is pegged at $369 million. The company registered Services and Other revenues of $326 million in third-quarter 2018.

Earnings Whispers

Our proven model does not conclusively show that Tesla is likely to beat on earnings in this quarter. This is because, a stock needs to have a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But, that is not the case here as you will see below.

Earnings ESP: Tesla has an Earnings ESP of -5.24%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Tesla currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, this, combined with its Earnings ESP, makes surprise prediction difficult.

Note that we caution against stocks with a Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to come up with an earnings beat this time around:

Cummins Inc. CMI has an Earnings ESP of +5.90% and a Zacks Rank #3 at present. The company’s financial results for fourth-quarter 2018 are slated to release on Feb 6.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Wabco Holdings Inc. WBC has an Earnings ESP of +2.81% and a Zacks Rank #3 at present. The company’s financial results for fourth-quarter 2018 are slated to release on Feb 15.

LKQ Corporation LKQ has an Earnings ESP of +0.11% and a Zacks Rank of 3 at present. The company is expected to release financial results for fourth-quarter 2018 on Feb 28.

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