Is Tesla (TSLA) Likely to Disappoint Q2 Earnings Estimates? - Analyst Blog

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Tesla Motors, Inc. ( TSLA ) is set to report second-quarter 2014 results on Jul 31. Last quarter, this electric carmaker had posted a -60.00% surprise. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Tesla started deliveries of Model S in China in Apr 2014. The company also launched the right-hand version of Model S in Britain in Jun 2014. These moves should increase the company's demand.


However, Tesla is facing a shortage of lithium-ion battery cells, due to which it is unable to meet the rising demand for Model S. The company expects vehicle deliveries to increase to 7,500 in the second quarter of 2014 from 6,457 cars in the first quarter.

Meanwhile, production volume is expected to increase 13-19% from the first quarter of 2014 to 8,500-9,000 cars. However, deliveries are expected to be lower than production due to increase in the number of vehicles in transit to Europe and Asia. Further, operating expenses are expected to increase in the second quarter of 2014.

The company believes that research and development expenses will rise 30% while selling, general and administrative expenses will increase 15% during the quarter, both on a sequential basis. As a result, Tesla expects to record a marginal adjusted profit in the second quarter of 2014.

Earnings Whispers?

Our proven model does not conclusively show that Tesla is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Tesla has an Earnings ESP of 0.00%. That is because the Most Accurate estimate and the Zacks Consensus Estimate both currently stand at 24 cents per share.

Zacks Rank: Tesla currently has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies in the automobile sector you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter:

Meritor, Inc. ( MTOR ) has an earnings ESP of +26.67% and a Zacks Rank #2 (Buy). The company will report second-quarter earnings on Jul 31, 2014.

BorgWarner Inc. ( BWA ), with an earnings ESP of +1.15% and a Zacks Rank #2, will post second-quarter earnings on Jul 31, 2014.

American Axle & Manufacturing Holdings Inc. ( AXL ) has an earnings ESP of +8.45% and a Zacks Rank #2. The company will release second-quarter financial results on Aug 1, 2014.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: MTOR , TSLA , BWA , AXL

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