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Record Model 3 Deliveries to Fuel Tesla's (TSLA) Q3 Earnings

Zacks Equity Research

Tesla TSLA is likely to trump earnings estimates when it releases third-quarter 2019 results on Oct 23, after the closing bell. The current Zacks Consensus Estimate for the quarter to be reported is a loss of 12 cents per share on revenues of $6.6 billion. The Zacks Consensus Estimate for third-quarter loss per share has been narrowed by 2 cents in the past 30 days.

The electric vehicle maker recorded wider-than-expected loss in the last reported quarter amid lower-than-anticipated automotive revenues. Precisely, automotive revenues in the second quarter came in at $5,376 million, lagging the Zacks Consensus Estimate of $5,458 million.  

As far as earnings surprises are concerned, Tesla displays a dismal record of missing the Zacks Consensus Estimate in three of the last four quarters. This is depicted in the graph below:

Tesla, Inc. Price and EPS Surprise

Tesla, Inc. Price and EPS Surprise

Tesla, Inc. price-eps-surprise | Tesla, Inc. Quote

Why a Likely Positive Surprise?

Our proprietary model predicts an earnings beat for Tesla this time around, as it has the right combination of two key ingredients. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +79.68%. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Tesla currently carries a Zacks Rank #3. A Zacks Rank #3, when combined with a positive ESP, makes us confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Setting the Tone

Rising Model 3 delivery, which forms a major chunk of the automaker’s overall deliveries, is likely to have aided Tesla’s top line in the to-be-reported quarter. Strong performance and impressive design of its products are expected to have ramped up sales volumes. While Tesla didn’t reach its 100,000-car delivery target, the automaker’s third-quarter deliveries hit a new quarterly record. Notably, the company delivered 97,000 vehicles globally in the third quarter, up from 83,500 units in the year-ago period. Model 3 deliveries in the quarter came in at 79,600 units, up 42.5% year over year.  

The company’s energy generation and storage revenues for the soon-to-be-reported quarter are likely to have been robust mainly due to the storage business. Evidently, the Zacks Consensus Estimate for the metric is pegged at $434 million, suggesting an uptick from $399 million reported in the year-ago quarter. Moreover, the consensus estimate for service and other revenues is pegged at $611 million, indicating a 87% year-over-year increase.

Record deliveries in the third quarter, aided by Model 3 sales, and improved performance of the firm’s energy and storage business are likely to have buoyed earnings for the to-be-reported quarter.

Other Stocks to Consider

Tesla is not the only energy firm looking up this earnings season. Here are some companies, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.

American Airlines Group Inc. AAL has an Earnings ESP of +1.64% and a Zacks Rank #3. The company is slated to release third-quarter 2019 earnings on Oct 24.

Alliance Data Systems Corporation ADS is set to report third-quarter 2019 earnings on Oct 24. The company has an Earnings ESP of +1.34% and a Zacks Rank #3.

Allegiant Travel Company ALGT is set to report third-quarter 2019 earnings on Oct 24. The firm has an Earnings ESP of +1.39% and a Zacks Rank #3.

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