Tesla Q1 Earnings Likely to Disappoint Investors: Things to Note

Tesla TSLA is set to release first-quarter 2025 results on April 22, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at 45 cents per share and $21.85 billion, respectively.

The consensus mark for first-quarter earnings per share has declined 11 cents in the past 30 days. The estimate for the bottom line implies no change from the year-ago levels. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year uptick of 2.6%.

In the last earnings season, the company missed earnings per share estimates. In the trailing four quarters, Tesla missed estimates thrice and beat once, with the average earnings surprise being 0.8%.

Factors at Play

Tesla delivered 336,681 cars (323,800 Model 3/Y and 12,881 other models) worldwide in the first quarter. This marked the lowest quarterly figure in more than two years. Sales were down from 495,570 units in the fourth quarter of 2024 and 386,810 in the first quarter of last year. The deliveries missed our estimate of 426,407 units.

An obvious reason behind Tesla’s soft first-quarter 2025 deliveries was the fact that it had to retool its factories to produce the new version of its Model Y SUV. Also, CEO Elon Musk’s political involvement hasn’t worked in favor of Tesla’s brand image. The anti-Musk sentiment has hurt the company’s sales.

Discounts and incentives are likely to have constrained automotive revenues and gross margins. We expect revenues from automotive sales to be $17.48 billion. Gross margins from automotive sales are expected at 15.8%, down 2 percentage points from the year-ago period.

While the automotive segment is likely to be under pressure, Tesla is set to benefit from increasing energy generation and storage revenues, thanks to the positive reception of Megapack and Powerwall products. In the first quarter of 2025, Tesla deployed 10.4 GWh of energy storage — a staggering 156% year-over-year increase. We expect revenues from the Energy Generation/Storage segment to be $2.1 billion, suggesting growth of 70% on a yearly basis. Our estimate for Services/Other unit is pegged at $2.5 billion, implying growth of 13% year over year.

Meanwhile, continued investments for capacity expansion of not just vehicle factories but also supercharging network service, internal applications and battery processes are expected to have limited operating profits. Tesla’s capital expenditure has been consistently rising as the EV giant makes efforts to boost output capacity at its gigafactories, ramp up 4680 battery cell production, enhance the Supercharger infrastructure and develop AI-related technologies. Discouragingly, Tesla also expects its operating expenses to rise in 2025. High operating expenses are also likely to strain margins.

What Does Our Model Say?

Our proven model doesn’t conclusively predict an earnings beat for Tesla this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.

Earnings ESP: Tesla has an Earnings ESP of -11.7%. This is because the Most Accurate Estimate is pegged 5 cents below the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Tesla currently carries a Zacks Rank #5 (Strong Sell).

(See the Zacks Earnings Calendar to stay ahead of market-making news.)

Stock With the Favorable Combination

While an earnings beat looks uncertain for Tesla, here are a few players from the auto space that, per our model, have the correct ingredients to post an earnings beat this time.

QuantumScape QS will release first-quarter 2025 results on April 23. The company has an Earnings ESP of +8.07% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for QuantumScape’s to-be-reported quarter’s loss is pegged at 21 cents per share. QuantumScape surpassed earnings estimates in one of the trailing four quarters and missed on the other three occasions, with the average negative surprise being 7%.

LKQ Corp. LKQ will release first-quarter 2025 results on April 24. The company has an Earnings ESP of +3.19% and a Zacks Rank #3.

The Zacks Consensus Estimate for LKQ’s to-be-reported quarter’s earnings and revenues is pegged at 79 cents per share and $3.57 billion, respectively. LKQ surpassed earnings estimates in two of the trailing four quarters for as many misses, with the average negative surprise being 2.45%.

BorgWarner BWA will release first-quarter 2025 results on May 7. The company has an Earnings ESP of +5.24% and a Zacks Rank #3.

The Zacks Consensus Estimate for BorgWarner’s to-be-reported quarter’s earnings and revenues is pegged at 97 cents per share and $3.38 billion, respectively. BorgWarner surpassed earnings estimates in each of the trailing four quarters, the average surprise being 17%.

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This article originally published on Zacks Investment Research (zacks.com).

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