Key Takeaways

  • Analysts estimate adjusted EPS of $0.99 vs. $0.44 in Q2 FY 2020.
  • Vehicle deliveries, which Tesla reported earlier this month, rose YOY at the fastest pace since Q2 FY 2019.
  • Revenue is expected to rise at its fastest pace since Q4 FY 2018 amid strong vehicle deliveries.

Tesla Inc. (TSLA)'s growth is gathering momentum. The company finished its first full year of profitability in 2020. And during the last three quarters, the electric carmaker has posted dramatic increases in earnings, revenue and vehicle deliveries. Tesla is enjoying growing popularity worldwide among both consumers and investors, making it the world's largest carmaker with a market cap of more than 631 billion as of July 22, 2021.

Investors will watch to see if Tesla can keep up that momentum when it reports earnings on July 26, 2021 for Q2 FY 2021. They are likely to get positive news. Analysts expect a big boost to adjusted earnings per share (EPS) as revenue growth continues to accelerate.

Investors also will focus on Tesla's vehicle deliveries for the quarter, which the company already reported earlier this month. Total deliveries for Q2 FY 2021 came in at 201,250, up 122.0% compared to the same quarter a year-ago.

The good news for Tesla comes at a time of risk for CEO Elon Musk. While Tesla is not liable, Musk faces the possibility of having to personally pay billions of dollars related to a lawsuit over Tesla's acquisition of SolarCity in 2016. Musk testified in court this month, defending Tesla's purchase of the solar energy company against allegations made by a group of shareholders that the acquisition was done to bail out SolarCity. Musk says the purchase was made for one reason: to make Tesla more than just a car company. Though Tesla faces no financial risk in the case, the lawsuit has been a distraction for him as the company's CEO.

Tesla's shares have dramatically outperformed the broader market over the past year. The stock began to take off in November 2020 following the U.S. presidential election and positive results regarding the efficacy of COVID-19 vaccines. But after reaching a peak in late January 2021, the stock has fallen considerably. Shares of Tesla, nonetheless, have provided a total return of 108.9% over the past year, well above the S&P 500's total return of 33.8%

One Year Total Return for S&P 500 and Tesla
Source: TradingView.

Tesla Earnings History

Tesla's stock fell following its Q1 FY 2021 earnings report despite strong results and an adjusted EPS that beat estimates. The company's adjusted EPS surged 306.6%, its fastest pace in at least 16 quarters. Revenue rose 73.6% compared to the year-ago quarter, marking the fastest rise since Q4 FY 2018. It was Tesla's most profitable quarter on record despite facing supply disruptions. The automaker had to idle production at its Fremont, California factory in February due to parts shortages. A global semiconductor shortage has forced a number of automakers to idle production at various times this year.

Tesla reported mixed results for Q4 FY 2020, missing analysts' adjusted EPS estimates by a wide margin while beating revenue expectations, albeit narrowly. Adjusted EPS rose 94.6%, a robust pace but a marked slowdown from Q3's 105.2% increase. Revenue grew 45.5%, its fastest pace since Q2 FY 2019. The quarter capped off Tesla's first full year of profitability despite its bottom line being weighed down by several factors, including additional supply-chain costs. Earnings were aided, however, by the sale of emissions-related regulatory credits that the company sells to other automakers.

Analysts expect Tesla to maintain its strong momentum into Q2 FY 2021. Adjusted EPS is expected to rise 126.5%. It would mark the electric automaker's eighth straight quarter of positive adjusted EPS. Revenue is forecast to rise 89.4%, continuing a growth acceleration trend that began in the third quarter of FY 2020. For full-year FY 2021, analysts expect adjusted EPS to more than double last year's level. Annual revenue is forecast to rise 56.5%, which would be the fastest pace of growth since FY 2018.

Tesla Key Stats
  Q2 2021 (FY) Q2 2020 (FY) Q2 2019 (FY)
Adjusted Earnings Per Share ($)  0.99 (estimate) 0.44 -0.22
Revenue ($B) 11.4 (estimate) 6.0 6.3
Vehicle Deliveries  201,250 (actual) 90,900 95,400

Source: Visible Alpha; Tesla.

The Key Metric

As mentioned above, investors are also interested in Tesla's vehicle deliveries. The company's primary business is making electric cars and it needs to continue expanding production in order to grow revenue and profits. In the final quarter of FY 2020, the electric automaker said it expects to increase vehicle deliveries by 50% annually. However, the market is becoming increasingly competitive, with Volkswagen AG (VOW3) becoming the top-selling all-electric vehicle maker in Europe last year. As Tesla fights to remain a leader in the industry, it will have to be careful that it doesn't sacrifice quality as it ramps up production. Last month, Tesla began a recall of more than 285,000 vehicles in China due to problems with the Tesla vehicles' cruise-control system. Quality concerns such as these could hurt Tesla's reputation and dampen future demand for its vehicles.

Tesla has steadily increased its delivery of vehicles over the past several years. The company has increased its vehicle deliveries from 103,200 in FY 2017 to 499,600 in FY 2020. Last year, Tesla suffered a minor setback in the second quarter when total vehicle deliveries fell 4.7% year over year (YOY), which was the first decline in deliveries in at least 13 quarters. But it quickly made up for that drop in the latter half of the year as deliveries rose 43.6% YOY and 61.2% YOY in Q3 and Q4, respectively. Tesla continued to accelerate its growth in vehicle deliveries in FY 2021. They rose 108.9% compared to the year-ago quarter and by 122.0% in Q2, which were already announced. Those delivery numbers should support analysts' optimistic expectations for Tesla's revenue growth for the quarter.