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The Zacks Analyst Blog Highlights Tesla, Driven Brand Holdings and American Axle & Manufacturing

For Immediate Release

Chicago, IL – July 19, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Tesla TSLA, Driven Brand Holdings DRVN and American Axle & Manufacturing AXL.

Here are highlights from Monday’s Analyst Blog:

Weaker Q2 Deliveries to Impair Tesla (TSLA) Q2 Earnings

Tesla is set to release second-quarter 2022 results on Wednesday, after the closing bell. The electric vehicle (EV) manufacturer's upcoming results will reflect the impact of weak vehicle deliveries during the quarter under discussion that put an end to the string of record quarterly deliveries. Parts shortages and pandemic-related production shutdowns at Tesla's plant in Shanghai caused a big drop in global vehicle deliveries.

(Also read: Will Tesla Fail to Impress Investors in Q2 Earnings?)

Q1 Highlights

In the last reported quarter, Tesla reported earnings of $3.22, which surpassed the Zacks Consensus Estimate of $2.15. This marked the fifth straight earnings beat for the company. Higher-than-expected deliveries and automotive gross profit resulted in this outperformance. The bottom line also compared favorably with the year-ago earnings of 93 cents a share. Total revenues came in at $18,756 million, beating the consensus mark of $17,276 million. The top line also witnessed year-over-year growth of 80.5%.

Production and delivery totaled 305,407 and 310,048 vehicles for first-quarter 2022, reflecting a year-over-year jump of 69% and 68%, respectively. The Model 3/Y registered production and deliveries of 291,189 and 295,324 vehicles, marked year-over-year growth of 61% and 62%, respectively. Production and delivery of the Model S/X totaled 14,218 and 14,724 units, respectively, for the quarter under review.

Tesla had cash/cash equivalents and long-term debt and finance leases of $17,505 million and $3,153 million, respectively, as of Mar 31, 2022. Importantly, the firm generated a free cash flow of $2,228 million during first-quarter 2022.

Shanghai Factory Shut Down Limits Q2 Output

A resurgence in coronavirus cases in China had forced Tesla to temporarily shut down its Shanghai gigafactory for much of the early part of the quarter.Operations at the Shanghai gigafactory were suspended for three weeks in April. Per China Passenger Car Association (CPCA), the factory produced a mere 10,757 vehicles during the month, marking a 97.7% fall from March levels. Tesla managed to gradually ramp up operations and produced 33,554 units at the Shanghai factory in May and 70,000 in June.

Nonetheless, Tesla reported weak overall deliveries for the April-June period, putting an end to the string of record quarterly deliveries. Besides suspension of operations at the Shanghai gigafactory, supply-chain disruptions and challenges associated with the opening of new factories in Germany and Texas dented the delivery count.

Second-quarter deliveries totaled 254,695 units, down from 310,048 vehicles delivered in the first quarter of 2022, snapping a two-year streak of quarter-on-quarter gains. The deliveries also missed the Zacks Consensus Estimate of 303,532 units.

Tesla delivered 238,533 Model 3/Y units during the quarter under discussion, lagging the consensus mark of 291,491 units. As for the Model S/X, 16,162 units were delivered in the second quarter of 2022, falling short of the Zacks Consensus Estimate of 16,445.

In addition to declining sequential deliveries, high costs of raw materials and logistical constraints are also expected to have weighed on margins. The Zacks Consensus Estimate for the cost of automotive sales is pegged at $11,083 million, implying an increase from $10,914 million in the last reported quarter.

On a brighter note, Tesla is likely to have benefited from the rise in average selling price (ASP) but we think that Tesla might have managed to only partially offset the lower deliveries with high ASP. The Zacks Consensus Estimate for total automotive revenues for the second quarter of 2022 is pegged at $16,398 million, implying a contraction from $16,861 million recorded in the first quarter of 2022.

Overall Earnings & Revenue Projections for Q2

Our proven model does not conclusively predict an earnings beat for Tesla as it doesn't have the right combination of a positive Earnings ESP and a favorable Zacks Rank. The company has an Earnings ESP of -11.68% and Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for the to-be-reported quarter's earnings is pegged at $1.91 per share, indicating an increase of 31.7% on a year-over-year basis. The Zacks Consensus Estimate of $17.39 million for sales indicates a 45.4% rise on a year-over-year basis.

Stocks with the Favorable Combination

Here are a couple of players from the auto space, which, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported:

Driven Brand Holdings has an Earnings ESP of +14.45% and a Zacks Rank #3.

The Zacks Consensus Estimate for Driven's to-be-reported quarter's earnings and revenues is pegged at 29 cents per share and $486 million, respectively. Encouragingly, DRVN surpassed earnings estimates in the last four quarters, with the average being 30.1%.

American Axle & Manufacturing has an Earnings ESP of +23.08% and a Zacks Rank #1.

The Zacks Consensus Estimate for American Axle's to-be-reported quarter's earnings and revenues is pegged at 13 cents per share and $1.37 billion, respectively. AXL surpassed earnings estimates in three of the last four quarters and missed once, with the average being 847.9%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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