On Tuesday, Nov. 3, electric-car maker Tesla Motors (NASDAQ:TSLA) will report third-quarter results. Taking place at a critical time for the company, just as it's supposed to begin ramping up Model S sales significantly higher and shortly after the Model X launch, investors will be watching closely.
Here's what investors need to know going into the earnings release.
On average, analysts expect Tesla to report revenue and non-GAAP earnings per share of $1.26 billion and a loss of $0.48. These results compare to year-ago revenue and non-GAAP EPS of $932 million and $0.02.
The expected jump in Tesla's revenue reflects the company's already reported 49% year-over-year growth in Q3 vehicle sales.
Tesla's expected non-GAAP loss reflects the company's outsized year-over-year growth in research and development and selling, general, and administrative expenses as a percentage of revenue as the company invests in the growth of its service and sales footprint and the R&D associated with the Gigafactory, Model X, and Model 3.
Notably, however, the company's operating leverage is beginning to improve on a sequential basis, and the company said during its second-quarter letter to shareholders that Tesla expects this trend to continue.
"Our operating leverage is expected to improve, with revenue and gross profit both growing at a faster rate than operating expenses during the next several quarters," Tesla explained.
Tesla noted in its second-quarter letter to shareholders that it expected operating expenses to grow 5 to 10% sequentially in Q3. To ensure management is executing as planned, it would be worth investors' time to check in on the metric to see if the company followed through accordingly.
Likely the most closely watched figure when Tesla reports third-quarter results will be its guidance for Q4.
Going into 2015, it initially guided for 55,000 vehicle deliveries during the year. This represented expectations for a whopping 74% year-over-year growth in vehicle sales.
But after Tesla's second quarter, it reduced its expectations for the full year, providing a new guidance range of 50,000 to 55,000 vehicles for the full year, citing "many dependencies that could influence our Q4 production and deliveries."
We are still testing the ability of many suppliers to deliver high quality production parts in quantities sufficient to meet our planned production ramp [for Model X]. Since production ramps rapidly late in Q4, a one-week push out of this ramp due to an issue at even a single supplier could reduce Model X production by approximately 800 units for the quarter. Furthermore, since Model S and Model X are produced on the same general assembly line, Model X production challenges could slow Model S production.
Guidance for 50,000 to 55,000 vehicles for the full year, however, is still impressive. With Tesla delivering just over 11,500 vehicles in Q3 as planned, it will need to deliver about 17,000 vehicles during Q4 to achieve the bottom end of its guidance range for the full year. This would represent huge year-over-year and sequential growth for Tesla's vehicle deliveries.
With little sign of Tesla ramping up Model X production to a meaningful level, it raises questions about whether Tesla can live up to its own target. Will growth in Model S sales offset lacking Model X vehicles if production of the new vehicle fails to live up to Tesla's expectations?
Tesla's third-quarter earnings will definitely be a quarter worth tuning into. Beyond getting key metrics on revenue, EPS, and guidance, the company will likely provide updates on the Gigafactory, Model 3, and Tesla Energy.
Investors can find Tesla's third-quarter results on its investor relations page shortly after market close on Nov. 3.