Will Tesla (TSLA) Miss Earnings This Quarter? - Analyst Blog

Tesla Motors, Inc. TSLA is set to report first-quarter 2014 results after the market closes on May 7. In the fourth quarter of 2013, it posted an earnings surprise of +250%. Let's see how things are shaping up for this announcement.

Factors Influencing This Quarter

Tesla's vehicle deliveries are expected to reduce to 6,400 cars in the first quarter from 6,892 cars in the fourth quarter of 2013, despite increase in production volume. Although this decline is mainly due to increase in the number of vehicles in transit to Europe and Asia, it will negatively affect revenues.

Moreover, operating expenses are expected to increase 15% in the first quarter of 2014. Further, the company believes that research and development expenses will increase due to design and engineering work on Model X. Selling, general and administrative expenses are also projected to rise due to increase in retail locations and Supercharger facilities.

Further, Tesla is facing a shortage of lithium-ion battery cells due to which it is unable to meet the rising demand for Model S. Although the company extended its supplier agreement with Panasonic Corporation PCRFY, the shortage of battery cell supply is expected to limit production capacity in the first half of the year.

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.

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 60.00%. This is because the Most Accurate Estimate stands at a loss of 4 cents and the Zacks Consensus Estimate is currently at a loss of 10 cents.

Zacks Rank: Tesla currently has a Zacks Rank #5 (Strong Sell), which when combined with a positive ESP, makes surprise prediction difficult.

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

Other Stocks to Consider

Here are two other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: 

Advance Auto Parts Inc. AAP, with an Earnings ESP of +5.12% and a Zacks Rank #3 (Hold).The company is expected to report its first-quarter results on May 15, 2014.

Power Solutions International, Inc. PSIX, with an Earnings ESP of +8.70% and a Zacks Rank #2 (Buy). Power Solutions will be reporting first-quarter 2014 earnings on May 8, 2014.