Toyota Corp earnings & Outlook
Toyota Corp., the world’s largest carmaker by volume, reported a better-than-expected jump in second-quarter profit Thursday and raised its profit outlook despite the global semiconductor shortage.
Toyota reported an operating profit of 750 billion yen, a 48% jump over the same period a year earlier and 26% better than market expectations. It hiked its full-year operating profit forecast 12% to 2.8 trillion yen ($24.5 billion), which would mark a six-year high.
Like other global automakers, Toyota has been forced to cut output due to the chip shortage and lockdown measures that have slowed component production at factories in Malaysia and Vietnam, even as vehicle demand around the world rebounds from a pandemic slump.
Toyota Earnings
- Net Profit: Toyota Motor’s net profit rose 33% from a year earlier to 626.65 billion yen ($5.50 billion) for the quarter ended Sept. 30. That beat the estimate of Y532.53 billion from a FactSet poll of analysts.
- Revenue: Second-quarter revenue increased 11% from a year earlier to Y7.546 trillion. That also exceeded the estimate of Y7.102 trillion in the FactSet poll.
- Outlook: Toyota cut its full-year group vehicle-sales forecast to 10.3 million units from a previous view of 10.6 million units as the Covid-19 pandemic disrupts the supply chain for automakers globally. Toyota expects net profit to rise 11% to Y2.490 trillion, up from its previous view of a 2.4% increase, thanks partly to a weaker yen.
- Return to shareholders: Toyota boosted its interim dividend to Y120 per share, from Y105 per share a year earlier, and announced a share buyback program that could repurchase up to Y150.0 billion worth of its shares from Nov. 5-March 31.
- Share buyback: Toyota also announced a share buyback of up to 150 billion yen or 0.86% of shares and hiked its first-half dividend by 15 yen to 120 yen.
Commentary
Toyota was lifted by favorable foreign currency exchange rates, which boosted the value of its dollar-denominated earnings when converted back into Japanese yen. Toyota CFO Kenta Kon credited cost control, better inventory management, and improved pricing power for the resilient results, even as Toyota cut back on production. A tight supply of vehicles and high demand, for example, enabled Toyota to curb incentives and slash marketing expenses.
But Toyota has already cut its production target for the year to end-March once to 9 million vehicles and last month slashed November output plans by as many as 150,000 vehicles.
Still, car demand in key markets, such as China, the United States, and Europe is rebounding following an earlier pandemic-induced slump, with demand for electric vehicles (EVs) in particular seeing healthy growth.
Like its peers, Toyota is investing heavily in technology and production capacity to build EVs as countries around the world impose tighter rules to cut carbon emissions.
It has announced plans to have 15 battery, electric vehicle models, on the market by 2025 and will spend $13.5 billion by 2030 to develop EV batteries and their supply system.
Should I buy Toyota shares?
Toyota Motor’s stock fell by 0.7% in the last twenty-one trading days. In comparison, the broader S&P500 index rose by 7% over the same period. The stock has been steady in recent weeks before its Q2 FY 2022 earnings.
The current consensus among 20 polled investment analysts is to buy stock in Toyota Motor Corp. This rating has held steady since October when it was unchanged from a buy rating.
The 17 analysts offering 12-month price forecasts for Toyota Motor Corp have a median target of 209.95, with a high estimate of 237.32 and a low estimate of 162.17. The median estimate represents a +15.71% increase from the last price of 181.44.