Will High Costs Offset NIO’s Delivery Growth in Q3 Earnings?

NIO Inc. NIO is slated to release third-quarter 2023 results on Dec 5, before market open. The Zacks Consensus Estimate for the quarter’s loss per share and revenues is pegged at 43 cents and $2.63 billion, respectively.

The consensus estimate for NIO’s loss per share has narrowed by 2 cents in the past 90 days. Its bottom-line estimate implies a decline of 19.4% from the year-ago reported number. Revenues indicate year-over-year growth of 44%.

In the last reported quarter, NIO incurred a loss per share of 51 cents, wider than the Zacks Consensus Estimate of a loss of 36 cents. The reported loss was also wider than the year-ago loss of 25 cents due to lower vehicle margins and higher operating expenses. This China-based electric vehicle maker posted revenues of $1.2 billion, lagging the Zacks Consensus Estimate of $1.35 billion and declining 14.8% year over year due to lower delivery volume.

Things to Note Ahead of Q3 Results

In the third quarter of 2023, NIO delivered 55,432 vehicles, within the company’s guided range of 55,000-57,000 vehicles. The deliveries jumped 75.4% year over year but fell short of our model estimate of 56,822 units. During the quarter, NIO launched the all-new EC6, a smart electric coupe SUV—based on NIO Technology 2.0— with upgraded design, performance, and intelligence features.

We forecast third-quarter revenues from vehicle sales to be RMB17,368.4 million, implying growth of 45.6% on higher year-over-year deliveries. Our projection for other sales suggests year-over-year growth of 60%.

While we expect higher revenues to aid the to-be-reported quarter’s results, the high cost of goods sold is likely to have weighed on margins. High SG&A and R&D expenses are also likely to have played spoilsport. The company has been bearing the brunt of high operating expenses for the past several quarters, and the trend is expected to have continued amid new products and technology expansion initiatives as well as marketing activities.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for NIO for the quarter to be reported, as it does not have the right combination of the two key ingredients. A 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, as elaborated below.

Earnings ESP: NIO has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is on par with 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: It currently carries a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

XPeng XPEV incurred a loss per share of 62 cents for the third quarter of 2023, narrower than the Zacks Consensus Estimate of a loss of 72 cents. Total revenues were $1.17 billion, up 25% on a year-over-year basis. While revenues from vehicle sales were up 25.7% year over year to $1.08, service and other sales rose 17.7% to $0.09 billion. Deliveries came in at 40,008 units during the quarter. Gross margin was negative 2.7%, witnessing a steep fall from 13.5% registered in the year-ago period due to the high cost of sales, which flared up 48.4%.

Vehicle margin was negative 6.1% in the quarter under review against 11.6% in the corresponding period of 2022. R&D and SG&A expenses were $180 million (down 12.9% year over year) and $230 million (up 4% year over year), respectively. As of Sep 30, the company had cash and cash equivalents of $1.67 billion. Long-term borrowings were $880 million as of Sep 30.

For the fourth quarter of 2023, XPEV expects deliveries within 59,500-63,500 units, implying a jump of 168-186%. Revenues are envisioned in the band of RMB12.7-13.6 billion, indicating a surge of 147-164.6%.

Li Auto LI posted earnings per share of 45 cents for the third quarter of 2023. Revenues from vehicle sales totaled $4.61 billion, rocketing 271.6% year over year. Revenues from other sales and services jumped 258.7% to $145.7 million. Total revenues came in at $4.75 billion, up 271.2% from the corresponding quarter of 2022. Total deliveries in the quarter were 105,108 units, skyrocketing 296.3% from the year-ago period. Vehicle margin and gross margin increased to 21.2% and 22%, respectively, in the quarter under review.

R&D and SG&A expenses were $386.1 million (up 56.1% year over year) and $348.7 million (up 68.8% year over year), respectively. As of Sep 30, the company had cash and cash equivalents of $10 billion. Long-term borrowings were $218.5 million as of Sep 30. For the fourth quarter of 2023, Li Auto expects deliveries within 125,000-128,000 units, implying a jump of 169-176.3%. Revenues are envisioned in the band of RMB5.27-5.40 billion, indicating a surge of 117.9-123.1%.

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