Toyota (TM) Lags Q2 Earnings Estimates, Narrows Sales View

Toyota Motor’s (NYSE:TM) shares moved up 1.8% to close the trading session at $142.86 on Nov 7, after it recorded improved year-over results in second-quarter fiscal 2020 (ended Sep 30, 2019). Bringing in pleasant news for investors, the firm announced a $1.8-billion share buyback.

Japan’s auto giant posted earnings of $3.87 per ADR, up from the year-ago figure of $3.59. However, the bottom line missed the Zacks Consensus Estimate of $3.94. The company recorded net income of ¥592 billion in the quarter under review, up 1.2% from the year-ago period.

Consolidated revenues increased to ¥7.6 trillion ($71 billion) from ¥7.3 trillion ($65.5 billion) recorded in the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $66.9 billion.

In the first six months of fiscal 2020, consolidated vehicle sales increased to 4,638,565 units globally, marking an increase of 219,637 units from the same period of the last year.

Segmental Results

All figures mentioned below are U.S. GAAP based.

The Automotive segment’s net revenues rose 4.5% year over year to ¥6.8 trillion ($63.4 billion) in second-quarter fiscal 2020. Operating income also increased 6.7% from the year-ago figure to ¥493 billion ($4.5 billion).

The Financial Services segment’s net revenues rose to ¥541.4 billion ($5.04 billion) in the quarter under review from ¥534 billion ($4.9 billion) in the prior-year period. Operating income also increased 47% year over year to ¥119.6 billion ($1.1 billion).

All Other businesses’ net segmental revenues increased to ¥454.9 billion ($4.2 billion) in the quarter from ¥412.3 billion ($3.8 billion) in the prior-year period. However, operating income came in at ¥27.8 billion ($259 million), down 7.7% year over year.

Financial Position

Toyota had cash and cash equivalents of ¥3.9 trillion ($36.8 billion) as of Sep 30, 2019. Long-term debt amounted to ¥10.3 trillion ($95.6 billion), representing a debt-to-capital ratio of 34.4%. At the end of the first half of fiscal 2020, operating cash flow was ¥2.0 trillion ($19 billion), up 13.2% year over year. Toyota announced that its board members have approved an interim dividend of ¥100 per common share.

Fiscal 2020 Guidance

Anticipating a slowdown in India, Indonesia and Thailand, the company narrowed the annual vehicle sales target. For fiscal 2020, Toyota expects consolidated vehicle sales to be 8.95 million units, down from the previous forecast of 9 million units. The company’s forecast of consolidated net revenues of ¥29.5 trillion, operating income of ¥2.4 trillion and net income of ¥2.15 trillion remains intact.

Zacks Rank & Stocks to Consider

Toyota currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector are Spartan Motors, Inc. (NASDAQ:SPAR) , SPX Corporation (NYSE:SPXC) and BRP Inc. (NASDAQ:DOOO) , each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spartan Motors has an estimated earnings growth rate of 85.42% for the current year. The company’s shares have surged 110.7% in a year’s time.

SPX has an expected earnings growth rate of 23.18% for 2019. The company’s shares have surged 57.6% in the past year.

BRP has a projected earnings growth rate of 18.49% for the current year. Its shares have gained around 18.9% over the past year.

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