Honda Profits More Than Fourfold - Analyst Blog

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Honda Motor Co. ( HMC ) revealed more than fourfold increase in profits to ¥131.72 billion ($1.66 billion) or ¥73.09 (92 cents) per share in the first quarter of its fiscal year ending March 31, 2013 from ¥31.80 billion or ¥17.64 in the comparable quarter of 2011. However, the company's profits were lower than the Zacks Consensus Estimate of $1.15 per share.

Consolidated net sales and other operating revenues surged 42.1% to ¥2.44 trillion ($30.71 billion) driven by higher revenues in the automobile business with the recovery in production from the twin disaster in Japan last year, and increased revenues in the motorcycle business, despite unfavorable foreign currency translation effects.

Consolidated operating profits increased significantly by 679.5% to ¥176.01 billion ($2.22 million) from ¥22.58 billion a year ago, driven by higher sales volume and model mix, despite increased SG&A and R&D expenses as well as unfavorable foreign currency effects.

Segment Results

Revenues in the Automobile segment soared 60.6% to ¥1.89 trillion ($23.84 million) driven by a 10.5% increase in unit sales. Operating profits were ¥100.66 billion ($1.27 million) in sharp contrast to a loss of ¥76.23 billion in the first quarter of fiscal 2012. Improved sales volume and model mix favorably affected operating profits, despite increased SG&A and R&D expenses and unfavorable foreign currency effects.

Revenues in the Motorcycle segment scaled up 4.9% to ¥346.65 billion ($4.37 billion) due to a 2.1% rise in unit sales. However, operating profits fell 18.1% to ¥36.80 billion ($464.0 million) from ¥44.93 billion last year due to increased SG&A expenses and unfavorable foreign currency effects, despite improved sales volume and model mix.

Revenues in the Financial Services segment slid 3.3% to ¥131.28 billion ($1.66 billion) due to unfavorable foreign currency translation effects. Operating income dipped 23.8% to ¥40.84 billion ($514.94 million) from ¥53.61 billion due to a fall in residual gain of off-lease vehicle sales and increased cost of credit risk.

Revenues in the Power Product and Other segment ebbed 5.6% to ¥67.47 billion ($851.0 million) due to lower revenues in other businesses and unfavorable foreign currency translation effects, despite higher unit sales. The segment had an operating loss of ¥2.29 billion ($28.87 million) compared with a profit of ¥260 million a year ago due to higher SG&A expenses and unfavorable foreign currency effects.

Financial Position

Consolidated cash and cash equivalents was ¥1.13 trillion ($14.30 billion) as of June 30, 2012 compared with ¥1.25 trillion as of March 31, 2012. Total debt amounted to ¥3.99 trillion ($50.30 billion) as of June 30, 2012, down from ¥4.11 trillion as of March 31, 2012. This translated into a debt-to-capitalization ratio of 47.3% compared with 48.3% a year ago as of March 31, 2012.

In the quarter, cash flow from operations decreased to ¥176.45 billion ($2.22 billion) from $201.70 billion in the fiscal 2012-quarter. Meanwhile, capital expenditures increased to ¥135.80 billion ($1.71 billion) from ¥73.55 billion in the comparable period of 2011.

Guidance

Honda has projected revenues to improve 29.6% to ¥10.30 trillion in fiscal 2013. Operating profits are expected to increase 168.0% to ¥620 billion, net profits are anticipated to rise 122.2% to ¥470 billion and earnings per share are expected to be ¥260.78 for the year.

Our Take

Honda is a leading manufacturer of automobiles and the largest manufacturer of motorcycles in the world. It is the second largest automaker in Japan following Toyota Motor Corp. ( TM ).

The company is recognized internationally for its expertise and leadership in developing and manufacturing a wide variety of products that incorporate its efficient internal combustion engine technologies ranging from small general-purpose engines to specialty sports cars. Currently, it retains a Zacks #4 Rank, which translates to a short-term (1 to 3 months) rating of Sell.

($1 = JPY 79.31)
 


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HMC , TM

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