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Will Tesla's (TSLA) Q1 Earnings Beat on Higher Unit Sales?

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Tesla, Inc. (TSLA - Free Report) is set to report first-quarter 2017 results after the market closes on May 3. In the last quarter, the electric car maker posted an earnings miss of 5.04%.

Let us see how things are shaping up for this announcement.

Tesla Inc. Price and EPS Surprise

 

Tesla Inc. Price and EPS Surprise | Tesla Inc. Quote

Factors Influencing this Quarter

Tesla delivered over 25,000 vehicles in first-quarter 2017, up 69% year over year. The company remains on track to deliver between 47,000–50,000 vehicles in the first half of 2017. In first-quarter 2017, the company expects automotive gross margins to improve to third-quarter 2016 levels and expand thereafter in second-quarter 2017.

Improved factory capacity and lower supplier bottlenecks are helping Tesla increase production to meet the rising demand for its vehicles. The company’s first-quarter vehicle productions were at a record high of 25,418 units. The rise in production will lead to higher revenues, as currently the demand for Tesla’s cars exceeds supply.

The company outperformed the Zacks categorized Auto Manufacturers-Domestic industry in the past three months, with the company returning 24.8% while the industry gained only 3.2% over the same period.

Tesla is rapidly expanding its business. It is actively undertaking international expansion and has signed a deal to sell 200 electric cars to Dubai's Road & Transport Authority (RTA). Further, it plans to make Model 3 available in many new markets, including India, Brazil, South Africa, New Zealand, Singapore and Ireland. The company is also focused on expanding its Supercharger network.

Tesla has also launched a solar project in Hawaii, in association with Kauai Island Utility Cooperative (“KIUC”). It will provide solar power to the Hawaiian island of Kauai, using its panels and giant battery packs at the farm. Under the terms of the collaboration, KIUC will purchase power for a period of 20 years at the rate of 13.9 cents per kilowatt-hour.

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 (Strong Buy), 2 (Buy) or 3 (Hold) 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% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 67 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Tesla carries a Zacks Rank #2. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ferrari N.V. (RACE - Free Report) has an Earnings ESP of +5.66% and a Zacks Rank #3. The company’s first-quarter 2017 financial results are expected to release on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries Holdings, Inc. (CF - Free Report) has an Earnings ESP of +55.56% and a Zacks Rank #3. The company is expected to report first-quarter 2017 results on May 3.

Albemarle Corporation (ALB - Free Report) has an Earnings ESP of +1.05% and a Zacks Rank #3. The company is expected to report first-quarter 2017 financial numbers on May 3.

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