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Here's Why Tesla (TSLA) is Set to Top Q3 Earnings Estimates

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Tesla (TSLA - Free Report) is slated to release third-quarter 2020 results on Oct 21, after the closing bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at 54 cents per share and $8.2 billion, respectively.

The electric-vehicle pioneer beat second-quarter 2020 earnings estimates on higher-than-anticipated automotive revenues. Tesla managed to beat estimates in each of the trailing four quarters, with the average surprise being 645.2%. 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 third-quarter earnings per share has been revised upward by 9 cents in the past 30 days. The figure indicates an improvement from the year-ago earnings of 37 cents a share. The Zacks Consensus Estimate for third-quarter revenues indicates year-over-year growth of 30%.

Earnings Whispers

Our proven model predicts an earnings beat for Tesla for the to-be-reported quarter, as it has the right combination of the 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 +3.53%. This is because the Most Accurate Estimate is pegged 2 cents higher than the Zacks Consensus Estimate.

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

Factors at Play

Tesla reported stellar third-quarter 2020 deliveries amid gradual recovery of the auto sector from the coronavirus lows during the second quarter. The company registered deliveries of 139,300 vehicles, marking 53.7% and 43.6% increase on a sequential and yearly basis, respectively. 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.

The Zacks Consensus Estimate for automotive revenues is pegged at $7,020 million, indicating an increase from the year-ago level of $5,132 million. The consensus mark for revenues from Automotive Leasing & Services and Others is pegged at $260 million and $614 million, indicating year-over-year growth of 17.6% and 12%, respectively.The Zacks Consensus Estimate for revenues from the energy generation and storage segment is pegged at $439 million, implying an increase from the year-ago quarter’s $402 million.

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

Other Stocks With Favorable Combination

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

Genuine Parts Company (GPC - Free Report) has an Earnings ESP of +3.27% and carries a Zacks Rank #1 at present. The company is slated to release third-quarter 2020 earnings on Oct 22.

Autoliv (ALV - Free Report) has an Earnings ESP of +2.52% and currently carries a Zacks Rank #3. The company is slated to release third-quarter 2020 earnings on Oct 23.

Gentex Corporation (GNTX - Free Report) has an Earnings ESP of +8.37% and carries a Zacks Rank #2 currently. The company is slated to release third-quarter 2020 earnings on Oct 23.

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