Will Tesla's (TSLA) Record Delivery Count Aid Q3 Earnings?

Tesla TSLA is set to release third-quarter 2020 results on Oct 21, after the closing bell.

The electric vehicle manufacturer’s results will likely reflect the favorable impact of rising Model 3/Y deliveries, which forms a major chunk of the automaker’s overall deliveries.

(Also read: Here's Why Tesla is Set to Top Q3 Earnings Estimates)

Q2 Highlights

In the last reported quarter, Tesla posted earnings of 44 cents per share as against the Zacks Consensus Estimate of loss of 10 cents. Automotive revenues came in at $5,179 million. Tesla had cash and cash equivalents of $8,615 million as of Jun 30, 2020, compared with $8,080 million on Mar 31, 2020. Importantly, the firm generated free cash flow (FCF) of $418 million during the second quarter.

During the June-end quarter, Tesla reported delivery and production of 90,891 and 82,272 vehicles, respectively, reflecting a year-over-year decrease of 5% for both metrics. The company reported Model 3/Y production and deliveries of 75,946 and 80,277 units, marking a year-over-year increase of 5% and 3%, respectively. The production rate of Model 3/Y persistently improved during this period.

Production & Deliveries in Q3

With the Model 3 sedan being its flagship vehicle, Tesla has established itself as a leader in the electric vehicle (EV) segment. Solid 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. Also, elevated production and deliveries of Model Y vehicles are likely to have buoyed the automaker’s earnings during the quarter under review.

Tesla reported stellar third-quarter 2020 production and deliveries amid a gradual recovery of the auto sector from the coronavirus crisis faced during the second quarter. It registered production and deliveries of 145,036 and 139,300 vehicles, respectively, in the September-end period, way higher than the 96,155 units produced and 97,186 units delivered in the corresponding quarter of 2019. The delivery count marks a 53.7% and 43.6% jump on a sequential and yearly basis, respectively, and sets a new quarterly record for the auto giant. This upside mainly reflects Tesla’s ability to overcome the pandemic-induced restrictions that had caused its vehicle assembly plant to wind down to minimum basic operations and the shutdown of the company’s main factory in Fremont in the second quarter.
Notably, for the quarter in discussion, the Model 3/Y division registered production of 128,044 vehicles, while 124,100 vehicles were delivered. The reported figures are way higher than the production of 75,946 units and delivery of 80,277 units of Model 3/Y during the April-June quarter.
With China’s auto market finally out of the woods, Tesla has been benefiting from high sales in the country. Notably the company retailed 11,014, 11,811 and 11,329 Model 3 vehicles in China in the months of July, August and September, according to China Passenger Car Association (CPCA).

Overall Earnings & Revenue Projections for Q3

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at 55 cents, higher than the earnings of 37 cents a share posted in the prior-year quarter. The Zacks Consensus Estimate of $8,203 million for sales indicates a 30.1% jump on a year-over-year basis.

All in all, robust Model 3/Y demand, significant Shanghai Gigafactory progress, and solid performance of the energy and storage business are likely to have aided Tesla’s performance during the to-be-reported quarter.

The company currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks With Favorable Combinations

Tesla is not the only auto company promising a positive outcome this earnings season. Here are a few other stocks worth considering, as these also have the right combination of elements to come up with an earnings beat this time around:

Ford Motor Company F has an Earnings ESP of +19.51% and flaunts a Zacks Rank #1, at present. It is scheduled to report earnings results on Oct 28.
Gentex Corporation GNTX has an Earnings ESP of +1.94% and carries a Zacks Rank of 3 currently. The company is set to announce quarterly figures on Oct 23.

Cooper Tire Rubber Company CTB has an Earnings ESP of +19.84% and currently sports a Zacks Rank #1. The company is slated to release quarterly numbers on Oct 29.

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