Can Rising Deliveries Buoy NIO's Q2 Earnings Amid Cost Woes?

Zacks Equity Research
·3-min read

NIO Inc. NIO is set to release second-quarter 2020 results on Aug 11, before the opening bell. The Zacks Rank #3 (Hold) company’s results will likely reflect the rising demand for the ES6 model, which forms a major chunk of the China-based electric vehicle (EV) maker’s overall deliveries. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

(Also read: Here's What Investors Should Note Ahead of NIO's Q2 Earnings)

First-Quarter Highlights

In the last reported quarter, NIO incurred a loss of 22 cents per share on revenues of $193.8 million. Cash and cash equivalents, restricted cash and short-term investment were $338.6 million as of Mar 31, 2020.

During the March-end quarter, it delivered 3,838 vehicles, which compared unfavorably with 3,989 and 8,224 units in first-quarter 2019 and fourth-quarter 2019, respectively. Coronavirus-led low demand resulted in the slump in vehicle deliveries in the last reported quarter. Notably, total deliveries comprised 3,643 ES6s and 195 ES8s.

Second-Quarter Deliveries Boost Optimism

While the COVID-19 outbreak weighed on the firm’s first-quarter vehicle deliveries, stabilization of the pandemic in China led to rebound in sales in the second quarter.NIO’s focus on technology and service helped it in boosting sales during the to-be-reported quarter. NIO delivered 10,331 vehicles in the second quarter that exceeded the firm’s guidance and increased 191% from a year ago. 

High demand for the ES6 model, NIO’s 5-seater premium electric SUV, is expected to have enhanced its second-quarter 2020 revenues. Markedly, NIO delivered 3,740 vehicles in June, setting a new monthly record. The figure represented 179.1% year-over-year growth, and comprised 2,476 ES6s and 1,264 ES8s — the company’s 7 seater electric-SUV..

While rising deliveries are expected to have positively impacted NIO’s revenues, escalating R&D and SG&A costs are likely to have dented operating margins. However, the company has been bearing the brunt of operational inefficiency over the last several quarters. The trend is likely to have impacted its performance in the quarter to be reported as well.

Overall Earnings & Revenue Projections

The Zacks Consensus Estimate for the to-be-reported quarter’s loss is pegged at 34 cents a share, narrower than the loss of 45 cents incurred in the prior-year quarter. The Zacks Consensus Estimate for revenues of $485.9 million indicates a 121.2% uptick on a year-over-year basis.

While our model does not indicate an earnings beat for the electric vehicle startup NIO, the red hot EV maker Tesla TSLA delivered an earnings beat in the latest quarterly release. In contrast, electric-truck startup Nikola NKLA posted wider-than-expected loss. Meanwhile, another EV maker Workhorse Group WKHS is slated to unveil quarterly numbers on Aug 10.

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