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Will Stellar Model 3 Sales Drive Tesla's (TSLA) Q4 Earnings?

Zacks Equity Research

Tesla TSLA is set to release fourth-quarter 2019 results on Jan 29, after the closing bell. This Zacks Rank #2 (Buy) company’s quarterly results will likely reflect the favorable impact of solid growth in Model 3 delivery, which forms a major chunk of the automaker’s overall deliveries.

The stock has more than doubled in the past three months and become the first publicly-listed U.S. automaker to cross $100 billion in market valuation — more than General Motors GM and Ford F.

(Also read: Tesla (TSLA) to Post Q4 Earnings: What's in the Offing?)

Q3 Highlights

In the last reported quarter, Tesla posted earnings of $1.86 per share on $6.3 billion in revenues, as against projections of a modest loss of $0.15 per share. Free cash flow was $371 million, and cash and cash equivalents on its balance sheet grew to $5.3 billion.

Tesla reported record delivery of 97,000 vehicles and production of 96,000 units. During the quarter, the company reported record Model 3 delivery of 79,703 units. It opened 11 new service centres during this period and added 68 Mobile Service vehicles to its fleet.

Record Deliveries Drive Growth

Tesla registered record production and deliveries of 104,891 and 112,000 vehicles, respectively, in fourth-quarter 2019, higher than the 86,555 and 90,700 units delivered in the corresponding quarter of 2018.

With Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the EV segment. Strong performance and impressive design of its products are expected to have ramped up sales volumes during the quarter under review. Being the first mass-market electric car in North America and Europe, Model 3 is one of the best-selling vehicles. The car’s market-leading safety, performance and impressive specs have made it a huge success.

Notably, the company’s Model S/X and Model 3 reported record production and deliveries in the fourth quarter. The Model S/X division recorded production and delivery volume of 17,933 and 19,450 vehicles, respectively. The Model 3 division registered record production and deliveries of 86,958 vehicles and 92,550 vehicles, respectively.

Record deliveries, aided by stellar Model 3 sales, are likely to have buoyed earnings for the to-be-reported quarter.

Overall Earnings & Revenue Projections for Q4

The Zacks Consensus Estimate for Tesla’s earnings is $1.62, which suggests a 16.06% decline from the prior-year reported figure. Also, the Zacks Consensus Estimate for sales of $7.05 billion indicates a 2.48% decrease on a year-over-year basis.

An Auto Stock to Consider

Here’s another company from the sector, which according to our model has the right combination of elements to post an earnings beat in the fourth quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gentherm Inc. THRM is set to report fourth-quarter 2019 earnings on Feb 19. The stock has an Earnings ESP of +15.70% and currently sports a Zacks Rank #1.

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