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What's in the Offing for Tesla (TSLA) this Earnings Season?

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Tesla Inc. (TSLA - Free Report) is set to report second-quarter 2017 results after the market closes on Aug 2. Last quarter, this electric car maker saw an earnings miss of 194.03%.

In the trailing four quarters, the company beat estimates in one quarter and missed the same in the remaining three, resulting in an average negative earnings surprise of 29.89%.

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

Tesla Inc. Price and EPS Surprise


Factors Influencing this Quarter

Tesla is actively undertaking mergers and acquisitions to meet its targets and expand its business. The company completed the acquisition of Grohmann Engineering and expects it to play an integral role in helping it reach its increased production capacity goals. Further, the company believes that the acquisition of SolarCity will increase manufacturing efficiency and lower customer acquisition costs.

The company is actively undertaking international expansion. It plans to add almost 100 retail, delivery and service locations globally, thus representing a 30% increase in facilities in 2017. To deal with the shortage of lithium-ion batteries, Tesla is building a Gigafactory in Nevada to produce the batteries in collaboration with various partners, including Panasonic.

It is also working toward expanding its product portfolio to boost sales.

However, Tesla is facing opposition to its direct-selling model in some U.S. states, namely, Texas, Arizona, Michigan and West Virginia that have banned the direct sales of vehicles by any automaker. Limited demand for electric cars, low number of charging stations and the company’s inability to generate profit are a few other concerns that it has been facing.

Earnings Whispers

Our proven model does not conclusively show whether Tesla is likely to beat or miss 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 -18.5% as the Most Accurate estimate of a loss of $2.37 is wider than the Zacks Consensus Estimate of a loss of $2. 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 #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

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

Price Performance

Tesla’s stock has surged 33.4% in the last six months, thereby substantially outperforming the 4.9% gain of the industry it belongs to.

Stocks to Consider

Some better-ranked companies you may want to consider with the right combination of elements to come up with an earnings beat this quarter, per our model are as follows:

Cummins Inc. (CMI - Free Report) has an Earnings ESP of +3.10% and carries a Zacks Rank #2. The company is expected to report second-quarter 2017 results on Aug 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +5.04% and carries a Zacks Rank #2. Its second-quarter 2017 financial results are expected to release on Aug 3.

Horizon Global Corporation (HZN - Free Report) has an Earnings ESP of +2.99% and carries a Zacks Rank #3. The company’s second-quarter 2017 financial results are expected to release on Aug 1.

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