Tesla Earnings: What to Look For

Key Takeaways

  • Analysts estimate adjusted EPS of $0.59 vs. $0.37 in Q3 2019.
  • Vehicle production is expected to rise sharply YOY.
  • Tesla expected to post robust revenue growth amid the COVID-19 pandemic.

Tesla Inc. (TSLA)'s stock has risen by nine-fold in the past year as its market value has soared to $420 billion amid growing optimism about the electric automaker's future. Tesla, the world's largest automaker by market value, also handsomely beat estimates for vehicle deliveries in Q2 FY 2020 as it posted its fourth consecutive profitable quarter.

Investors will be watching to see if Tesla can continue its streak of profitability when it reports earnings on October 21, 2020 for Q3 FY 2020. Analysts estimate that Tesla will report sizable year-over-year (YOY) gains in revenue and adjusted earnings per share (EPS).

In the upcoming report, investors also will look closely at Tesla's key metric of vehicle production, which fell in Q2 2020 as the coronavirus pandemic expanded in the U.S. and globally. This figure is an important indicator of the company's ability to scale up its production to meet surging customer demand. Tesla, which reports these numbers early, blew past analysts' estimates as it boosted production by 50.7% during the quarter.

Tesla has dramatically outpaced the stock market, providing a 1-year trailing total return of 770.3%, about 47 times the S&P 500's total return for the same period.

Tesla historically has posted highly erratic earnings performance, reporting mostly EPS declines or losses over the eight quarters through Q2 FY 2019. Tesla then produced four straight quarters of profits through Q2 FY 2020, further boosting its stock on investor optimism that Tesla would be included in the S&P 500 index. The company's shares plunged in September after the company was passed over for inclusion in the index, but the stock has since recovered nearly all of that decline.

Analysts estimate adjusted EPS will rise 57.8% in Q3 2020. While that growth is strong, nonetheless it would mark a deceleration compared to Q1 and Q2 FY 2020, both of which swung back to positive EPS after quarterly losses a year prior.

By contrast, Tesla's revenue performance has been more stable. In the past three years, the company has posted robust quarterly revenue growth in all but two quarters, when it posted modest YOY declines. One of those quarters was Q2 FY 2020, when revenue fell 4.9%. Analysts expect revenue to rebound in Q3 FY 2020, jumping 30.2% to $8.2 billion. That quarterly revenue for Q3 FY 2020 would be about 150% bigger than the same quarter in 2017, a reflection of the company's rapid growth.

Tesla Key Metrics
 Q3 2020 (FY) (Estimated)Q3 2019 (FY)Q3 2018 (FY)
Adjusted Earnings Per Share ($)0.590.370.58
Revenue ($B)8.26.36.8
Vehicles Produced145,036 (actual)96,20080,100

Source: Visible Alpha

To keep its stock rising, the company will need to produce higher volumes of vehicles. That's why investors focus on vehicle production as a key measure of Tesla's longterm ability to grow its revenue, earnings and market share. Tesla also must keep production rising to protect and boost its market share amid stiffening competition from emerging rival electric vehicle manufacturers such as Nikola Corp. (NKLA) and NIO Ltd. (NIO) as well as big automakers such as GM. Investors have watched Tesla's vehicle production rates particularly closely in Q3 FY 2020, in part because the company shut down production at its Fremont, California factory for several weeks earlier in the year due to the pandemic.

In spite of this setback, the company was able to exceed analyst expectations for vehicle deliveries, a related metric, for Q2 FY 2020. Because Tesla releases quarterly car production figures ahead of its earnings reports, it is clear that the company beat analyst expectations on the production front. In Q3 FY 2020, Tesla produced 145,036 vehicles, ahead of the predicted 143,400 vehicles. Tesla's Q3 production was nearly six times the level only three years ago in Q3 FY 2017. 

Article Sources

  1. Visible Alpha. "Visible Alpha." Accessed Oct. 15, 2020.

  2. Tesla Inc. "Tesla Announces Date for Third Quarter 2020 Financial Results and Webcast." Accessed Oct. 15, 2020.

  3. Wall Street Journal. "Why Tesla Was Left Out of the S&P 500." Accessed Oct. 15, 2020.

  4. Tesla. "Tesla Operational Update." Accessed Oct. 15, 2020.

  5. CNBC. "Tesla shares soar after reporting big beat on second-quarter deliveries." Accessed Oct. 15, 2020.

  6. Tesla. "Tesla Q3 2020 Vehicle Production & Deliveries." Accessed Oct. 15, 2020.

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