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What's in Store for Nikola (NKLA) This Earnings Season?

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Nikola Corporation NKLA is scheduled to release fourth-quarter 2020 results on Feb 25, after the closing bell. The Zacks Consensus Estimate is pegged at a loss of 21 cents per share on revenues of $0.06 million for the quarter.

In the last reported quarter, the company delivered a narrower-than-anticipated loss of 31 cents per share. However, this loss was wider than the year-ago loss of 6 cents per share.

For the trailing two quarters, Nikola beat estimates on one occasion, missing in the other, the average negative surprise being -1.43%. This is depicted in the graph below:

Nikola Corporation Price and EPS Surprise

Nikola Corporation Price and EPS Surprise

Nikola Corporation price-eps-surprise | Nikola Corporation Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for Nikola’s fourth-quarter loss per share has widened by two cents over the past 60 days.

What the Zacks Model Says

Our proven Zacks model does not conclusively predict an earnings beat for Nikola this time around. The 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. However, that is not the case here as elaborated below.

Earnings ESP: Nikola has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nikola currently carries a Zacks Rank of 4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Let's delve deeper into the factors that are likely to have impacted Nikola’s fourth-quarter performance.

Key Factors

The third quarter of 2020, especially September, was particularly turbulent for Nikola, wherein the company was accused of fraud by Hindenburg Research. The fourth quarter seems equally gloomy for Nikola, once dubbed as the Tesla (TSLA - Free Report) of the trucking industry. In fact in November, Nikola and General Motors GM revised the initial agreement that was announced in September. Per the new agreement — a non-binding memorandum of understanding —General Motors will only be supplying fuel cells to Nikola, rather than receiving an equity stake in the company and building Nikola’s Badger pick-up truck. With General Motors backing out from building the Badger, Nikola was compeled to altogether abandon the Badger project.

To further worsen matters, in December, Nikola and Republic Services RSG discontinued their collaboration on refuse truck development. The goal of the collaboration was to build an industry-first fully-integrated refuse truck based on a zero-emission battery-electric drive platform. However, the program was terminated when the companies realized that the project would result in longer-than-expected development time and unexpected costs. This has resulted in the cancellation of the previously-announced vehicle order. This is also likely to have hindered the company’s performance during the fourth quarter.

Additionally, soaring technology costs and operational expenses (including SG&A and R&D costs) to develop advanced vehicles are likely to have dented margins during the quarter-to-be-reported.

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