Rivian Automotive (RIVN Quick QuoteRIVN - Free Report) is slated to release third-quarter 2024 results on Thursday, after market close. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at a loss of 89 cents a share on revenues of $970.7 million. 

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The loss per share estimate for the third quarter of 2024 has narrowed by a cent over the past 60 days. The bottom-line projection indicates a year-over-year improvement of 25.21%. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year contraction of 27.4%.

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For the current year, the Zacks Consensus Estimate for RIVN’s revenues is pegged at $4.63 billion, implying a rise of 4.4% year over year. The consensus mark for the 2024 bottom line is pegged at a loss of $3.98 per share, indicating an improvement from a loss of $4.88 per share in 2023. In the trailing four quarters, this California-based electric vehicle (EV) startup surpassed EPS estimates twice for as many misses, with the average negative earnings surprise being 0.42%.

Rivian Automotive, Inc. Price and EPS Surprise

Rivian Automotive, Inc. price-eps-surprise | Rivian Automotive, Inc. Quote

Q3 Earnings Whispers for RIVN

Our proven model predicts an earnings beat for Rivian 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. That’s the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

RIVN has an Earnings ESP of +2.06% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping Rivian’s Q3 Results

In the third quarter of 2024, Rivian delivered 10,018 vehicles, implying a decrease from 15,564 and 13,790 units reported in the year-ago period of 2023 and the second quarter of 2024, respectively. The deliveries also fell short of the 13,000 units expected by analysts, according to FactSet. Weak deliveries are expected to impact revenues of the to-be-reported quarter. Production in the third quarter of 2024 came in at 13,157 units, lower than 16,304 units in the year-ago period but up sequentially. This is because second-quarter 2024 production numbers suffered due to the factory shutdown for retooling.

On the positive side, Rivian aims to improve its cost structure through manufacturing adjustments. On the last earnings call, the company highlighted its new in-house drive unit, featuring an inverter with a 75% higher volume density and a 25% cost reduction while maintaining the same performance. CEO RJ Scaringe noted that retooling the R1 production line is focused on enhancing plant efficiency, controlling supplier expenses and incorporating new technologies. The company anticipates cost savings from these changes to start materializing in the second half of 2024, with significant benefits projected for fourth-quarter 2024. Rivian incurred a $451 million gross loss in the last reported quarter, exceeding a loss of $412 million in the year-ago quarter. We expect slight gross margin improvements in the third quarter of 2024 due to Rivian’s efforts to reduce production costs.

RIVN Stock Price Performance & Valuation

On a year-to-date basis, shares of RIVN have declined 56%, underperforming the industry, sector and the S&P 500 index.

YTD Price Performance

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RIVN is currently trading at a forward sales multiple of 1.91, lower than its average of 3.12 over the last five years. In comparison, Rivian’s peer Lucid Group (LCID Quick QuoteLCID - Free Report) is trading at a forward sales multiple of 4.13. Meanwhile, EV giant Tesla (TSLA Quick QuoteTSLA - Free Report) is currently trading at 6.91X forward sales.

RIVN Relatively Undervalued

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How to Play Rivian Stock Ahead of Q3 Results

Rivian’s strategic $5 billion collaboration with Volkswagen (VWAGY Quick QuoteVWAGY - Free Report) on shared EV technology and software holds the potential to strengthen its competitive edge. The upcoming MSP product lines —R2, R3, and R3X — promise enhanced performance and affordability, potentially boosting the company's future market share starting in 2026. These low-cost models could drive Rivian but not before 2026. Rivian's cost-cutting initiatives, including a 20% reduction in material costs for the Gen 2 R1 and a 45% cost decrease for the forthcoming R2 model, highlight its focus on long-term financial health.

Nonetheless, Rivian is facing a challenging period as it grapples with production disruptions caused by a shortage of a shared component impacting its R1 and RCV platforms. This supply chain setback, which began affecting operations in the third quarter of 2024 and has intensified recently, compelled the company to cut its annual production guidance to 47,000-49,000 vehicles, down from 57,232 units produced in 2023. This represents a slowdown for Rivian, which should have rather been in a growth mode.

RIVN expects 2024 deliveries to witness modest growth in the band of 50,500-52,000 vehicles compared with 50,122 units delivered in 2023. So, 2024 is expected to be somewhat of a muted year for Rivian. After a record sales year, Rivian now faces a tough period amid rising competition from premium EVs and more affordable rivals.

Investors should closely watch Rivian's upcoming earnings release, particularly its gross profit trajectory. Management previously indicated that the company remains on track to achieve gross profitability by the fourth quarter of 2024. Any update to this forecast will be crucial.

Overall, given current concerns, buying Rivian shares now may not be prudent. However, with the stock having significantly declined and valuation remaining reasonable, selling is also not advisable for current holders. The best approach is to hold the stock and wait for the upcoming earnings release before making further decisions.