It has been about a month since the last earnings report for Tesla (
TSLA Quick Quote TSLA - Free Report) . Shares have added about 32.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Tesla due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Tesla Posts Q2 Profit, Tops Sales Estimates
Tesla reported earnings per share of $2.18 in second-quarter 2020 against the Zacks Consensus Estimate of a loss of 49 cents. This outperformance stemmed from higher-than-anticipated revenues, which came in at $6,036 million, beating the consensus mark of $4,964 million. While the bottom line improved significantly from the prior-year quarter’s loss of $1.12 per share, the top line recorded a decline of 5%.
During the second 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 downside mainly resulted from a decline in the level of production due to coronavirus-led shutdown of its main factory in Fremont during the quarter. Though delivery was down from the year-ago quarter, the figure beat analysts’ estimates and was higher than 88,496 deliveries recorded in the first quarter.
Model 3/Y registered production and deliveries of 75,946 vehicles and 80,277, pointing to a year-over-year increase of 5% and 3%, respectively. While the production rate and deliveries of Model 3/Y persistently improved, Model S/X production and deliveries totaled 6,326 and 10,614 vehicles, down 56% and 40% year over year, respectively.
Total automotive revenues slid 4% year over year to $5,179 million in the reported quarter. This included $428 million from the sale of regulatory credits for electric vehicles, which increased a whopping 286% year over year. Tesla expects regulatory credit revenues to double year over year in 2020. Tesla’s second-quarter 2020 automotive gross margin was 25.4%, improving 653 basis points (bps) from second-quarter 2019.
Energy generation and storage revenues came in at $370 million in second-quarter 2020 compared with $369 million in the year-ago period. Services and other revenues were down 19.5% year over year to $605 million.
Total operating expenses totaled $940 million during the quarter under review, down from $1,088 million in the corresponding period of 2019.
Tesla had cash and cash equivalents of $8,615 million as of Jun 30, 2020 compared with $8,080 million on Mar 31, 2020. Net cash provided by operating activities amounted to $964 million in second-quarter 2020 compared with $864 million in prior-year period. Capital expenditure increased to $546 million from the year-ago quarter’s $250 million. Importantly, the firm generated free cash flow (FCF) of $418 million during the quarter. The prior-quarter FCF was negative 895 million. However, the reported figure declined 32% from the year-ago level.
Tesla maintains the target of exceeding 500,000 vehicle deliveries despite the recent production interruptions. However, amid coronavirus-related setbacks, Tesla refrained from providing any profit or cash flow forecast. Nonetheless, the company’s progress in the first half of 2020 has positioned it well for the second half of the year.
Model 3/Y installed capacity in Fremont is expected to extend from 400,000 to 500,000 units per year by the end of 2020. The construction of Model Y lines in Shanghai and Berlin Gigafactories are progressing well, and deliveries are expected to begin in 2021. Furthermore, deliveries for Tesla Semi are anticipated to begin in 2021. The company announced that it has chosen Austin to build the fifth Gigafactory.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 486.21% due to these changes.
At this time, Tesla has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Tesla has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.