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Will Progress in Production Aid Tesla's (TSLA) Q3 Earnings?


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Tesla, Inc.TSLA is scheduled to report third-quarter earnings results on Oct 24, after the market closes . In the last reported quarter, this electric carmaker delivered an earnings miss of 10.1%.

In the trailing four quarters, the company missed estimates twice and beat on the other two, with an average negative earnings surprise of 6%.

In the past three months, shares of Tesla have outperformed the industry it belongs to. Over this time, shares of the company have decreased 12.3%, whereas the industry declined 15.6%.

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

Third-quarter 2018 has been productive for Tesla. During the quarter under review, the company witnessed over 55% sequential rise in production to 80,142 vehicles, with Model 3 production rising almost two-fold from the last reported quarter. The total production number includes 26,903 units of Model S and X, and 53,239 units of Model 3.

Notably, Tesla produced more than 5,300 Model 3 sedans in the last week of third-quarter 2018, almost all of which were dual motor.

However, high costs associated with the company's Model 3 ramp-up are likely to have some negative impact on its results. In fact, higher mix of Model 3s in Tesla'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 $5 billion. The company registered Total Automotive revenues of $3.6 in second-quarter 2018.

The Zacks Consensus Estimate for Energy, Generation and Storage revenues for the soon-to-be-released quarter is pegged at $473 million. The company registered Energy, Generation and Storage revenues of $374 million in second-quarter 2018.

The Zacks Consensus Estimate for Services and Other revenues for the soon-to-be-released quarter is pegged at $312 million. The company registered Services and Other revenues of $270 million in second-quarter 2018.

Earnings Whispers

Our proven model does not conclusively show that Tesla is likely to beat on earnings 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 -50.59%. You can uncover the best stocks to buy or sell before they're 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 +1.46% and a Zacks Rank of 2. The company will report third-quarter 2018 financial figures on Oct 30.

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

Fox Factory Holding Corp. FOXF has an Earnings ESP of +2.77% and a Zacks Rank #3. The company's third-quarter 2018 financial results are expected to be released on Nov 7.

Meritor, Inc. MTOR has an Earnings ESP of +2.36% and is a Zacks #3 Ranked player. The company's third-quarter 2018 financial numbers are expected to be announced on Nov 14.

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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 Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: TSLA , FOXF , MTOR , CMI



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