Tesla Motors, Inc. TSLA is set to report second-quarter 2015 results on Aug 5. Last quarter, this electric carmaker had posted a positive earnings surprise of 13.58%. Let's see how things are shaping up for this announcement.
Factors Influencing this Quarter
Tesla delivered 11,507 vehicles in the second quarter of 2015, an impressive 52% improvement over the second quarter of 2014. This is a record high for Tesla and should translate into strong revenues for the quarter. In addition, Tesla is rapidly expanding its business. In Jun 2015, the automaker obtained a lease on a manufacturing facility spanning 500,000 square feet in Fremont to increase its manufacturing capacity and to establish more engineering labs. In May 2015, Tesla acquired Riviera Tool LLC, a manufacturer of tools and dies based in Michigan. This was the electric automaker’s first acquisition. It will allow Tesla to produce more vehicle models, going forward. All these initiatives will boost the results of the company.
Despite increasing sales, Tesla is still a loss-making company due to high expenses. CEO Elon Musk revealed at an industry conference in Jan 2015 that the company may not achieve net profits until the yet-to-be-launched Model 3 enters full-scale production in 2020. These losses are inevitable due to the significant investments made toward developing new vehicles and technologies, and establishing a retail network. Thus, we can expect the company to report losses in the second quarter as well.
Earnings Whispers
Our proven model does not conclusively show that Tesla is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Tesla has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both currently stand at a loss of $1.39.
Zacks Rank: Tesla currently carries a Zacks Rank #2 (Buy). Though a Zacks Rank #2 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Meanwhile, 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.
Stocks to Consider
Toyota Motor Corporation TM – a Zacks Rank #1 stock – will report its first-quarter fiscal 2016 financial numbers on Aug 4.
Metaldyne Performance Group Inc. MPG will post second-quarter 2015 results on Aug 4. The company carries a Zacks Rank #2.
Power Solutions International, Inc. PSIX – a Zacks Rank #2 stock – will report its second-quarter financial numbers on Aug 5.
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