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Tesla Earnings: What to Look For

By Daniel Sparks – Oct 12, 2021 at 7:31AM

Key Points

  • Could supply-chain challenges weigh on Tesla's financial results when the company reports earnings next week?
  • Investors should look for the automaker's vehicle order volume to be at record levels.
  • Tesla may raise its full-year guidance for vehicle deliveries when it reports third-quarter results.

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Can the company's third-quarter update live up to its recently reported record deliveries for the period?

Electric-car maker Tesla (TSLA 0.08%) has put a date to its third-quarter earnings report: Oct. 20. The report comes as the automaker's sales are soaring. Third-quarter deliveries, which get announced before the company's financial results, rose substantially both on a year-over-year and sequential basis. Can the automaker's third-quarter report live up to the high expectations that were bolstered by such a strong update on vehicle deliveries?

Ahead of Tesla's earnings release next week, here's a look at some of the key areas investors will want to be watching.

A Model Y with a paddle board strapped to its roof.

Model Y. Image source: Tesla.

1. Earnings

We already know Tesla's revenue must have jumped sharply in Q3. The company announced earlier this month that total deliveries during the period came in above 241,000, representing 73% year-over-year growth. A boost in vehicle sales this substantial, therefore, will surely translate to significant top-line growth -- and strong earnings growth during the period is likely, too.

What's less clear is the degree of earnings growth that likely occurred during the period. While improved scale and higher sales should lead to a meaningful jump in earnings, it's difficult to estimate how profit margins will fare in a challenging supply and logistics environment.

"Regarding supply chain," said Tesla CEO Elon Musk in the company's second-quarter earnings call, "while we're making cars at full speed, the global chip shortage situation remains quite serious." Furthermore, Tesla management cited other operating environment challenges, including port congestion, in the company's second-quarter shareholder letter. These challenges could lead to higher costs and make sharp earnings growth more difficult. 

On average, analysts expect non-GAAP earnings per share or $1.49 for the period, up from $0.76 in the year-ago period.

2. Demand

Investors will also want to look to see if Tesla provides any commentary on demand for its vehicles. The automaker said that global demand for its vehicles was at record levels at the end of Q2. Did this trend for orders persist in Q3?

Given Tesla's ambitious expansion plans, investors should look for orders to once again be at record levels as of the end of Q3.

3. Guidance

All year, Tesla has been guiding for deliveries to increase from about 500,000 last year to more than 750,000 this year. But with Tesla already delivering over 627,000 cars this year, and considering that Tesla delivered more than 241,000 units in Q3 alone, Tesla's full-year outlook for vehicle deliveries now appears too conservative.

Investors should look to see if Tesla revises its full-year 2021 vehicle delivery guidance higher -- hopefully to around 850,000, or possibly even more.

Tesla is scheduled to report its third-quarter quarterly results after market close on Wednesday, Oct. 20.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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