Tesla Motors Inc (TSLA): Earnings Whispers?

earningsTesla Motors Inc (NASDAQ:TSLA) is set to report third-quarter 2014 results on Nov 5. Last quarter, this electric carmaker had posted a positive surprise of 33.3%. Let us see how things are shaping up for this announcement.

Factors to Consider

Tesla is witnessing growing sales due to the strong performance and impressive design of its products. Vehicle deliveries are expected to increase to 7,800 in the third quarter of 2014 from 7,579 cars in the second quarter. This should have a positive impact on earnings. Tesla also launched the right hand drive Model S in the U.K. in June and in Hong Kong in July, which should help in additional revenue generation.

However, significant investments for developing Model X, expanding production capacity, construction of the Gigafactory and development of consumer support infrastructure is resulting in high research and development (R&D) and selling, general and administrative (SG&A) expenses, which weigh on the bottom line. R&D expenses are expected to increase 20% sequentially in the third quarter of 2014 and SG&A expenses are expected to rise 15%.

Moreover, the increased warranty on Model S drive unit to eight years and infinite miles on a retroactive basis will have an adverse effect on the company’s earnings in the short term due to the increase in warranty reserves. As a result of all these factors, Tesla expects to record a marginal adjusted profit in the third quarter of 2014.

Earnings Whispers?

Our proven model does not conclusively show that Tesla is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below:

Zacks ESP: Tesla has an Earnings ESP of 0.00%. That is because the Most Accurate estimate and the Zacks Consensus Estimate both currently stand at a loss of 15 cents per share.

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