Toyota (TM) Q4 Earnings Beat Estimates, FY18 Guidance Weak

Toyota Motor Corporation’s (NYSE:TM) shares fell 2.4% to close at $105.81 on May 10, after the automaker provided a weak guidance for fiscal 2018. Toyota’s earnings came in at $2.32 per ADR in fourth-quarter fiscal 2017 (ended Mar 31, 2017). Earnings surpassed the Zacks Consensus Estimate of $1.90. However, the Japanese automaker reported consolidated net income of ¥398.4 billion ($3.49 billion) in the quarter, down 6.6% from the year-ago period.

Consolidated revenues increased 6.7% year over year to ¥7.44 trillion ($65.46 billion) in the reported quarter. Moreover, the figure surpassed the Zacks Consensus Estimate of $62.32 billion.

Unit sales went up 6.4% year over year to 2.33 million vehicles globally. Sales improved 13.4% to 0.66 million units in Japan, while Europe saw a sales increase of 13.7% to 0.26 million vehicles. Meanwhile, sales rose 20.1% to 0.4 million units in Asia. Sales declined 0.9% to 0.69 million vehicles in North America and 8.8% to 0.32 million units in other regions (Central and South America, Oceania, Africa and the Middle East).

Operating income declined 20% to ¥438.9 billion ($3.85 billion).

Segment Results

The Automotive segment’s revenues rose 4.5% to ¥6.67 trillion ($58.5 billion) in the reported quarter, while operating income tumbled 17.1% to ¥372.8 billion ($3.27 billion).

The Financial Services segment’s revenues rose 3.1% to ¥476.6 billion ($4.18 billion), while the operating income decreased 62.9% to ¥27.5 billion ($241.2 million).

All Other businesses’ revenues rose 49.4% to ¥512.1 billion ($4.49 billion) in the quarter. Operating income surged 76.1% to ¥37.5 billion ($328.9 million).

Financial Position

Toyota had cash and cash equivalents of ¥3 trillion ($27.8 billion) as of Mar 31, 2017, compared with ¥2.93 trillion ($25.6 billion) as of Mar 31, 2016. Long-term debt amounted to ¥14.2 trillion ($131.5 billion) as of Mar 31, 2017 compared with ¥13.59 trillion ($113.25 billion) as of Mar 31, 2016.

In fiscal 2017, operating net cash flow was ¥3.41 trillion ($31.6 billion) compared with ¥4.46 trillion ($37.2 billion) recorded in the year-ago period.

Fiscal 2018 Guidance

Toyotaraised its consolidated vehicle sales guidance for fiscal 2018 to 8.90 million units compared with the 8.97 million units recorded in fiscal 2017.

Consolidated revenues are expected to be ¥27.5 trillion ($261.9 billion), reflecting a 0.4% decline over fiscal 2017.

The operating income guidance is ¥1.6 trillion ($15.2 billion) for 2018, implying a 19.8% decrease.

Net earnings are expected to be around ¥1.5 trillion ($14.3 billion) in fiscal 2018. The net income guidance reflects an 18.1% decrease.

Price Performance

Toyotahas underperformed the Zacks categorized Automotive–Foreign industry in the last three months. The automaker’s shares have dipped 6.2% over this period, while the industry witnessed a 5.5% decline.

Zacks Rank & Key Picks

Currently, Toyota carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks include Tata Motors Ltd (NYSE:TM) , Fiat Chrysler Automobiles N.V. (NYSE:FCAU) and CNH Industrial N.V. (NYSE:CNHI) . All carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tata Motors has an expected long-term growth rate of 27.9%.

Fiat Chrysler has an expected long-term growth rate of 22.4%.

CNH Industrial has an expected earnings growth rate of 20% over the long term.

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