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Will Progress in Model 3 Production Aid Tesla's Q4 Earnings?

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Tesla, Inc. (TSLA - Free Report) is expected to report fourth-quarter and full-year earnings results on Feb 7, 2018, after market close.  Last quarter, the electric carmaker delivered an earnings miss of 19.2%.

In the trailing four quarters, the company missed estimates thrice and beat once, with an average negative earnings surprise of 740.1%.

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

Lately, the most serious issue facing the company is the production of Model 3. In the third quarter, the company fell short of its production target of the new Model 3 sedan. During the quarter, the company delivered 220 Model 3s and produced 260, missing the production target of 1,500. This indicates that production has not been as smooth as anticipated.

In fourth-quarter 2017, the company made good progress in addressing Model 3 production bottleneck. In the last few working days of the fourth quarter, the company managed to significantly increase the production rate of Model 3. However, since the company is focusing on quality and efficiency, a slightly more gradual ramp through first-quarter 2018 is anticipated. The company intends to achieve the 5,000 units per week figure by the end of second-quarter 2018.

The Zacks Consensus Estimate for revenues for the soon-to-be-released quarter is $3.30 billion. The company registered revenues of $2.99 in third-quarter 2017.

The Zacks Consensus Estimate for Total Automotive revenues for the soon-to-be-released quarter is $2.6 billion. The company registered Total Automotive Revenue of $2.36 in third-quarter 2017.

The Zacks Consensus Estimate for Energy, Generation and Storage revenues for the soon-to-be-released quarter is $340 million. The company registered Energy, Generation and Storage revenues of $317.5 million in third-quarter 2017.

The Zacks Consensus Estimate for Services and Other revenues for the soon-to-be-released quarter is $309 million. The company registered Services and Other revenues of $304.3 million in third-quarter 2017.

Earnings Whispers

Our proven model does not conclusively show that Tesla will 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 -0.81% as the Most Accurate estimate of a loss of $3.20 is wider than the Zacks Consensus Estimate of a loss of $3.18. 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 #4 (Sell).

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

Stocks To Consider

Here are a few stocks worth considering from the same space with the right combination of elements to beat on earnings this time around:

Allison Transmission Holdings, Inc. (ALSN - Free Report) has an Earnings ESP of +10.40% and a Zacks Rank #2. The company is expected to report fourth-quarter 2017 results on Feb 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

BorgWarner, Inc. (BWA - Free Report) has an Earnings ESP of +0.39% and a Zacks Rank #3. The company’s fourth-quarter 2017 financial results are expected to be released on Feb 8.

Tenneco Inc. (TEN - Free Report) has an Earnings ESP of +1.52% and a Zacks Rank of 3. The company’s fourth-quarter 2017 results are slated to be announced on Feb 9.

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