Will positive earnings help the Workhorse share price rein in its losses?

Had you bought the Workhorse [WKHS] share price at the start of 2020, when it was trading at $3 and sold on 1 February 2021, when it closed at $40.16, you would have seen a hefty 1,222% return.

From then on, things get rockier for the manufacture of electric delivery vans and drones. In February, it lost out to defence contractor Oshkosh Corporation [OSK] in a bid to build the next generation of mail trucks for the US Postal Service. The USPS contract would have delivered a much-needed cash injection in a company that has been missing production targets and haemorrhaging millions.

Not landing the USPS contract caused the Workhorse share price to halve in the space of two days and by the start of March, it was trading at $15.95 – a 60% decline from the start of February. 

Things haven’t really improved for the Workhorse share price, which closed Friday 6 August at $10.10, down 4.58% on the day and 48.94% since the start of the year. Production delays have weighed shares down, while Workhorse’s attempt to overturn USPS’ decision – something to keep an eye out for in second-quarter earnings – looks like a long shot.

Will investors take an interest in the Workhorse share price as second-quarter numbers come into view?

 

What could move the Workhorse share price post-earnings?

A shake-up in the senior management team could see the Workhorse share price back on the right track, with revenues projected to grow substantially over the next couple of years.

Given the Workhorse share price’s recent volatility, investors will be crying out for some stability in the company’s c-suite. New leadership was put in place at the end of July when CEO Duane Hughes was ousted in favour of industry-veteran Rick Duach.

Top of Duach’s in-tray is hitting production targets. Quarter after quarter, Workhorse has failed to meet its own targets. In 2020, it missed its target of delivering 300 to 400 vehicles, notifying investors during third-quarter results that deliveries would be “substantially lower” without giving a specific number. For 2021, it cut its initial estimate of 1800 to 1000, which is a tall order considering Workhorse only produced 38 C-series vehicles in the first quarter.

“Our vehicle production numbers in April in comparison to the last few quarters are encouraging, as are the proactive steps we are taking to build our volumes and ensure consistent production” - Outgoing CEO Duane Hughes

 

Workhorse’s board said it was withdrawing its previous guidance to give Rauch time to conduct a “sufficient review” and to “establish a plan to address continuing challenges and opportunities”.

Problems affecting production numbers include supply chain issues and offshore shipping delays. Outgoing CEO Duane Hughes commented that April production numbers had been “encouraging” in a statement accompanying first-quarter earnings.

“Our vehicle production numbers in April in comparison to the last few quarters are encouraging, as are the proactive steps we are taking to build our volumes and ensure consistent production,” he said.

Just how encouraging production numbers are will be closely watched in the upcoming results, as will any inkling about which way Duach will take the company.

 

How did Workhorse perform last quarter?

Workhorse managed to deliver six vehicles in the first quarter, giving it a haul of $521,000, up from around $84,000 in the same period last year. Net loss was $120.5m, compared to net income of $4.8 million in the same period last year.

Weighing on earnings was an increase in research and development, administration, and employee costs. Other losses include a reduction in the value of its investment in Lordstown Motors [RIDE], which is now under investigation by US federal prosecutors.

  

When is Workhorse reporting Q2 earnings?

9 August.

 

What is Wall Street expecting?

Wall Street is expecting Workhorse to post a $0.29 loss per share, down from a $1.26 loss per share in the same period last year. Revenue is pegged at $6.41m, substantially up from the $92,000 seen last year.

Given that Workhorse has only started delivering vehicles, it might be more useful to judge the company on a quarter-on-quarter basis.

For the full year, analysts are expecting Workhorse to deliver a loss of $1.71 per share on revenue of $75.16m. For the full year of 2022, losses are expected to narrow to $0.38 per share on revenue of $245.89m.

Second-quarter earnings should provide the forum for Workhorse to outline how it's going to do things differently with fresh blood at the top. If shareholders get on board with the new CEO’s strategy, then Workhorse’s stock might see a bounce.

A consensus $12.7 price target on Yahoo Finance would see a 25% upside from its 6 August close of $10.10.