Tesla Motors, Inc. TSLA is set to report third-quarter 2015 results on Nov 3. In the last quarter, this electric carmaker had posted a positive earnings surprise of 41.01%. Let us see how things are shaping up for this announcement.
Factors Influencing this Quarter
Tesla delivered 11,580 vehicles in the third quarter of 2015, representing an impressive 49% improvement over the third quarter of 2014. This is a record high for Tesla and should translate into strong revenues for the quarter to be reported. Further, Tesla was planning to start high volume production of its battery packs for the Tesla Energy business at its Fremont factory from third-quarter 2015. This should augment revenues of the Services and other segment from the third quarter.
Despite increasing sales, Tesla remains a loss-making company due to high expenses. The company is expected to report losses in the third quarter as well. Also, operating expenses are projected to increase 5%–10% sequentially. Tesla expects a decline in average selling price by over 100 basis points in the third quarter of 2015 due to the strengthening of the dollar against other currencies and shifts in delivery mix toward lower priced models. This will adversely affect revenues as well as gross margin. Thus, automotive gross margin (excluding ZEV credits) is anticipated to be lower than 23.9% recorded in the second quarter.
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 71 cents.
Zacks Rank: Tesla carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Cooper Tire & Rubber Co. CTB has an Earnings ESP of +5.26% and a Zacks Rank #2 (Buy). The company’s third-quarter 2015 financial results are scheduled for release on Nov 2.
Magna International Inc. MGA has an Earnings ESP of +0.92% and a Zacks Rank #3. The company is expected to report third-quarter 2015 results on Nov 5.
Superior Industries International, Inc. SUP – a Zacks Rank #2 stock – will report its third-quarter financial numbers on Nov 3.
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