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Tesla Motors, Inc. Earnings Next Week: The Metrics That Really Matter

When Tesla (NASDAQ: TSLA  ) reports second-quarter financial results next Thursday, you can bet the pressure will be on. With the stock up almost 90% in the past 12 months and about 600% in the past two years, there are some seriously optimistic expectations priced into this electric-car maker. Can Tesla CEO Elon Musk & Co. deliver?

Model S. Image source: Tesla Motors.

On average, analysts expect Tesla to report $0.04 per share in earnings and $811 million revenue. But anyone who follows Tesla closely knows that the real metrics investors will be watching is vehicle deliveries and production, gross profit margin, and guidance.

Vehicle deliveries and production
Deliveries and production are the most closely scrutinized figures when Tesla reports quarterly results. After all, it's deliveries that determine the majority of Tesla's revenue.

In Tesla's most recent quarter, vehicle deliveries were 6,457. While that figure was down from the 6,892 vehicles it sold and delivered to customers in the fourth quarter of 2013, the decline was expected; Tesla had said it planned to fill out its overseas logistics pipeline. Indeed, Tesla's production of 7,535 not only easily surpassed deliveries by more than 1,000 vehicles but it also came in 135 cars higher than the production Tesla guided for.

What kind of deliveries can investors expect in Q2? Tesla guided for deliveries of 7,500 as it continues to grow its "pipeline of in-transit cars to Asia and Europe that have been built-to-order for customers." Since Tesla initially ramped up production of the Model S in the first quarter of 2013, deliveries have been fairly close to estimates -- but always higher. So expect deliveries of 7600 or more.

With Tesla saying that all of its Q2 orders were booked in the first quarter of 2014, production will be the more interesting metric of these two. Tesla said it would produce 8,500-9,000 vehicles during the quarter. Look for Tesla to come in at the high end of this range.

Tesla Fremont factory. Image source: Tesla Motors.

Gross profit margin
Tesla's gross profit margin is important, because it's what makes the electric car-maker stand out from its peers. With a profit margin around 25%, Tesla's gross profit margin doubles some of its larger rivals. The high gross profit margin is driven both by a high average selling price and a scalable and improving manufacturing line.

Tesla's non-GAAP automotive gross profit margin in its first quarter was an impressive 25.4%. Tesla expects a slight increase in Q2 as the metric makes its way to the company's year-end target for 28%. Look for 25.6% or higher. Also look for Tesla to maintain its year-end guidance for a 28% gross profit margin.

Given the extremely forward-looking assumptions priced into Tesla stock, guidance is always essential. In Q1, Tesla was aiming for "more than 35,000 Model S deliveries." This target would require Tesla to boost deliveries in the second half of 2014 from 15,000 in the first half to 20,000. The second half of the year, Tesla predicts, will benefit from production ramp and the filling pipeline of in-transit overseas vehicles.

The rest of the year, therefore, should look something like this:

Data for chart retrieved from Tesla's quarterly letter to shareholders. Periods with asterisks indicate a forward estimate, based on Tesla's year-end guidance for 35,000 deliveries in 2014.

For Tesla to easily meet its year-end goal of 35,000 vehicles, look for Q3 guidance for about 9,500 vehicles.

Beyond these metrics, investors should also keep an eye on comments from Tesla regarding Gigafactory plans and progress, the potential for the Model X as launch approaches, and reports on progress with the design of Tesla's Model 3.

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