Company / Analytics

Analytics, 13 May 2022

Toyota, Honda earnings and auto stocks outlook

Two of the world’s largest automakers reported yearly earnings and outlook of the auto industry this year.

On Wednesday, Toyota Motors reported earnings that exceeded expectations across the board, with record revenue, operating profit, and net income, despite struggling with pandemic-induced global supply chain challenges that continue to affect the auto industry. Toyota’s revenue rose 36% to $24.61 billion, while its profit margin increased 9.5% from 8.1% a year ago.

Similarly, Honda Motors also reported earnings that beat estimates, with net profit rising 7.6% and sales rising 10.5%, benefiting from strong motorbike sales and a weaker yen.

Automakers have seen their profit margins surge due to constrained production and low new-vehicle inventories, which have pushed up vehicle prices. But with things returning to normal, uncertainty remains on whether the trend will continue. Toyota presented a bearish outlook, forecasting that profits and net income will likely retreat at the end of the current fiscal year, though it expects record retail sales.

Meanwhile, Honda forecasts net profit will remain steady, despite the global semiconductor and other supply chain-related shortages in the car industry.

Toyota Earnings in Brief

Toyota reported record yearly earnings that exceeded revenue, operating profit, and net income expectations. The Japanese automaker said that operating profit climbed 36 per cent to 3 trillion yen ($24.61 billion) in the fiscal year ended March 31, which was higher than a previous high recorded in March 2016. The operating profit margin rose to 9.5%, up from 8.1% a year ago. Total fiscal year net income rose 27% to 2.85 trillion yen ($23.38 billion), while revenue grew 15 per cent to 31.38 trillion yen ($257.42 billion).

During the year, Toyota sales increased 7.6% to 8.23 million vehicles across all of its auto brands - Lexus and Toyota brands, Daihatsu and Hino. Worldwide sales increased 4.7% to 10.38 million vehicles in the 12 months. Notably, Toyota’s regional operating profit increased in virtually every major market worldwide.

What is the outlook of Toyota stock?

Despite the positive earnings, Toyota provided a bearish outlook. The company forecasts that operating profit and net income will retreat, even though retail sales will remain better. The company expects raw materials costs will more than double from that is spent last year, and this outlook is likely to be impacted by uncertainty over inflation in major markets such as the U.S., chip shortages and supply chain related woes and pandemic lockdown on China.

Should I buy Toyota stock?

The consensus among 20 polled investment analysts is to buy stock in Toyota Motor Corp. Meanwhile, the 17 analysts offering 12-month price forecasts for Toyota Motor Corp have a median target of 195.35, with a high estimate of 228.52 and a low estimate of 176.54. The median estimate represents a +20.93% increase from the last price of 161.55. Today Toyota stock price was on the rage of 159.63 - 162.13.

Honda Motors Earnings Brief

Like Toyota, Honda Motors reported record earnings as its annual net profit rose 7.6% to 707 billion yen ($5.5 billion) in the fiscal year ended March 2022. The company issued forecast of 710-billion-yen net profit for the year to March 2023. Total sales rose 10.5$, driven by increased sales revenue in motorcycle business and financial services business operations emanating from a positive foreign currency exchange effect.

However, Honda acknowledged that the economic environment remained difficult due to the impact of (the) semiconductor supply shortage, and surge in the cost of raw material costs, in addition to other factors. For instance, the company reported that it was forced to suspend or reduce production in Japan and other overseas factories due to supply chain and staffing issues related to COVID-19. Still, the automaker presented a positive outlook, but projected net profit for the current year will remain as the one just ended (around 710 billion yen ($5.5 billion), as the business risks and costs remain the same.

Stock forecast - should I buy Honda shares?

The current consensus among 20 polled investment analysts is to buy stock in Honda Motor Co Ltd. Meanwhile, the 17 analysts offering 12-month price forecasts have a median target of 34.49, with a high estimate of 41.35 and a low estimate of 27.00. Today Honda stock price was on the rage of 25.27 - 25.75.

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