Can Tesla (TSLA) Keep its Earnings Streak Alive in Q2?

Tesla TSLA is slated to release second-quarter 2020 results on Jul 22, after the closing bell. The electric-vehicle pioneer beat first-quarter 2020 earnings estimates on higher-than-anticipated automotive revenues. Over the trailing four quarters, Tesla beat estimates on three occasions and missed once, with the average surprise being 482.1%. This is depicted in the graph below:

Tesla, Inc. Price and EPS Surprise

Tesla, Inc. Price and EPS Surprise

Tesla, Inc. price-eps-surprise | Tesla, Inc. Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for Tesla’s second-quarter loss per share has been narrowed by 39 cents to 64 cents in the past 30 days. The figure indicates an improvement from the year-ago loss of $1.12 a share. The Zacks Consensus Estimate for revenues is pegged at $4.96 billion, indicating a decline from the reported sales of $6.35 billion in the corresponding period of 2019.

Earnings Whispers

Our proven model predicts an earnings beat for Tesla for the to-be-reported quarter, as it has the right combination of two key ingredients. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Tesla has an Earnings ESP of +135.17%. This is because the Most Accurate Estimate is pegged at earnings of 22 cents per share against the Zacks Consensus Estimate of a loss of 64 cents.

Zacks Rank: It carries a Zacks Rank of 3 currently.

Factors at Play

Although overall second-quarter vehicle deliveries declined slightly from the year-ago level amid coronavirus woes, the figure handily surpassed analysts’ estimates. The firm reported production and deliveries of 82,272 and 90,650 vehicles, respectively, in second-quarter 2020.

Increasing deliveries of Model 3, which forms a major chunk of the automaker’s overall deliveries, are likely to have aided Tesla’s automotive revenues in the to-be-reported quarter. Also, ramped up production and deliveries of Model Y are likely to have buoyed its earnings. It should be noted that Model 3/Y deliveries came in at 80,050, up from the prior-year level of 77,634. All in all, robust Model 3 demand, ramp up of Model Y production and significant Shanghai Gigafactory progress are likely to fuel Tesla’s results for the to-be-reported quarter.

Nonetheless, the consensus mark for automotive revenues is pegged at $4,004 million, suggesting a decline of 22.5% year over year. The Zacks Consensus Estimate for revenues from the energy generation and storage segment is pegged at $365 million, implying an increase from the prior quarter’s $293 million but a decline from the year-ago quarter’s $368 million. The consensus estimate for revenues from services and other is pegged at $554 million, pointing to a decline from $605 million reported in second-quarter 2019.

Musk’s Mail Triggers Optimism

While the revenue estimates are somewhat discouraging, Musk’s leaked mail to employees generated enthusiasm among investors. Musk sent an e-mail to employees, encouraging them to finish the to-be-reported quarter on a strong note and showing optimism that the firm could break even in the second quarter. The email said, “breaking even is looking super tight. Really makes a difference for every car you build and deliver. Please go all out to ensure victory!” If Tesla manages to remain in the black in second-quarter 2020 amid the challenging COVID-19 backdrop, it will be a jaw-dropping achievement for the company and Musk.

Other Stocks to Consider

Tesla is not the only auto firm looking up this earnings season. Here are some other companies from the same space, which according to our model also have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Harley-Davidson HOG has an Earnings ESP of +78.18% and carries a Zacks Rank #3 at present. The company is slated to release second-quarter 2020 earnings on Jul 28.

General Motors GM has an Earnings ESP of +13.07% and currently carries a Zacks Rank #3. The company is slated to release second-quarter 2020 earnings on Jul 29.

LKQ Corp. LKQ has an Earnings ESP of +55.31% and carries a Zacks Rank #3 currently. The company is slated to release second-quarter 2020 earnings on Jul 30.

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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.

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